10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission file number 1-14064

The Estée Lauder Companies Inc.

(Exact name of registrant as specified in its charter)

Delaware	11-2408943
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
767 Fifth Avenue, New York, New York	10153
(Address of principal executive offices)	(Zip Code)

212-572-4200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $.01 par value	EL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

At April 26, 2022, 231,805,171 shares of the registrant’s Class A Common Stock, $.01 par value, and 125,542,029 shares of the registrant’s Class B Common Stock, $.01 par value, were outstanding.

THE ESTÉE LAUDER COMPANIES INC.

INDEX

	Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings — Three and Nine Months Ended March 31, 2022 and 2021	2
Consolidated Statements of Comprehensive Income — Three and Nine Months Ended March 31, 2022 and 2021	3
Consolidated Balance Sheets — March 31, 2022 and June 30, 2021 (Audited)	4
Consolidated Statements of Cash Flows — Nine Months Ended March 31, 2022 and 2021	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures About Market Risk	68
Item 4. Controls and Procedures	68
Part II. Other Information
Item 1. Legal Proceedings	68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 6. Exhibits	69
Signatures	70

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended March 31				Nine Months Ended March 31
(In millions, except per share data)	2022		2021		2022		2021
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Cost of sales	994		939		3,274		2,848
Gross profit	3,251		2,925		10,902		9,431
Operating expenses
Selling, general and administrative	2,275		2,145		7,554		6,761
Restructuring and other charges	22		131		41		172
Goodwill impairment	—		—		—		54
Impairment of other intangible and long-lived assets	216		33		216		60
Total operating expenses	2,513		2,309		7,811		7,047
Operating income	738		616		3,091		2,384
Interest expense	41		43		125		131
Interest income and investment income, net	5		9		19		40
Other components of net periodic benefit cost	(1)		2		(2)		12
Other income	—		—		1		—
Earnings before income taxes	703		580		2,988		2,281
Provision for income taxes	130		122		630		421
Net earnings	573		458		2,358		1,860
Net earnings attributable to noncontrolling interests	(3)		(2)		(8)		(8)
Net earnings attributable to redeemable noncontrolling interest	(12)		—		(12)		—
Net earnings attributable to The Estée Lauder Companies Inc.	$	558	$	456	$	2,338	$	1,852
Net earnings attributable to The Estée Lauder Companies Inc. per common share
Basic	$	1.55	$	1.25	$	6.48	$	5.10
Diluted	$	1.53	$	1.24	$	6.39	$	5.03
Weighted-average common shares outstanding
Basic	359.2		363.6		360.7		362.9
Diluted	363.6		369.0		365.8		368.1

See notes to consolidated financial statements.

2

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Net earnings	$	573	$	458	$	2,358	$	1,860
Other comprehensive income (loss):
Net cash flow hedge gain (loss)	5		41		21		(16)
Retirement plan and other retiree benefit adjustments	4		7		12		19
Translation adjustments	28		(121)		(173)		170
Benefit (provision) for income taxes on components of other comprehensive income	(4)		(32)		(22)		6
Total other comprehensive income (loss), net of tax	33		(105)		(162)		179
Comprehensive income	606		353		2,196		2,039
Comprehensive income attributable to noncontrolling interests:
Net earnings	(3)		(2)		(8)		(8)
Translation adjustments	1		1		3		(1)
Total comprehensive income attributable to noncontrolling interests	(2)		(1)		(5)		(9)
Comprehensive income attributable to redeemable noncontrolling interest:
Net earnings	(12)		—		(12)		—
Translation adjustments	(14)		—		3		—
Total comprehensive income attributable to redeemable noncontrolling interest	(26)		—		(9)		—
Comprehensive income attributable to The Estée Lauder Companies Inc.	$	578	$	352	$	2,182	$	2,030

See notes to consolidated financial statements.

3

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)	March 31 2022		June 30 2021
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	3,836	$	4,958
Accounts receivable, net	2,209		1,702
Inventory and promotional merchandise	2,830		2,505
Prepaid expenses and other current assets	625		603
Total current assets	9,500		9,768
Property, plant and equipment, net	2,493		2,280
Other assets
Operating lease right-of-use assets	2,034		2,190
Goodwill	2,591		2,616
Other intangible assets, net	3,638		4,095
Other assets	1,103		1,022
Total other assets	9,366		9,923
Total assets	$	21,359	$	21,971
LIABILITIES AND EQUITY
Current liabilities
Current debt	$	269	$	32
Accounts payable	1,470		1,692
Operating lease liabilities	388		379
Other accrued liabilities	3,287		3,195
Total current liabilities	5,414		5,298
Noncurrent liabilities
Long-term debt	5,188		5,537
Long-term operating lease liabilities	1,948		2,151
Other noncurrent liabilities	1,758		2,037
Total noncurrent liabilities	8,894		9,725
Contingencies
Redeemable Noncontrolling Interest	865		857
Equity
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at March 31, 2022 and June 30, 2021; shares issued: 467,516,898 at March 31, 2022 and 462,633,034 at June 30, 2021; Class B shares authorized: 304,000,000 at March 31, 2022 and June 30, 2021; shares issued and outstanding: 125,542,029 at March 31, 2022 and 128,242,029 at June 30, 2021	6		6
Paid-in capital	5,746		5,335
Retained earnings	14,076		12,244
Accumulated other comprehensive loss	(626)		(470)
	19,202		17,115
Less: Treasury stock, at cost; 235,234,161 Class A shares at March 31, 2022 and 229,115,665 Class A shares at June 30, 2021	(13,052)		(11,058)
Total stockholders’ equity – The Estée Lauder Companies Inc.	6,150		6,057
Noncontrolling interests	36		34
Total equity	6,186		6,091
Total liabilities, redeemable noncontrolling interest and equity	$	21,359	$	21,971

See notes to consolidated financial statements.

4

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended March 31
(In millions)	2022		2021
Cash flows from operating activities
Net earnings	$	2,358	$	1,860
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	546		475
Deferred income taxes	(90)		(103)
Non-cash stock-based compensation	283		255
Net loss on disposal of property, plant and equipment	6		19
Non-cash restructuring and other charges	2		97
Pension and post-retirement benefit expense	59		75
Pension and post-retirement benefit contributions	(30)		(35)
Goodwill, other intangible and long-lived asset impairments	216		114
Changes in fair value of contingent consideration	—		(2)
Gain on previously held equity method investment	(1)		—
Other non-cash items	(4)		(17)
Changes in operating assets and liabilities:
Increase in accounts receivable, net	(548)		(506)
Decrease (increase) in inventory and promotional merchandise	(398)		13
Increase in other assets, net	(61)		(122)
Increase (decrease) in accounts payable	(199)		55
Increase (decrease) in other accrued and noncurrent liabilities	(132)		629
Decrease in operating lease assets and liabilities, net	(38)		(30)
Net cash flows provided by operating activities	1,969		2,777
Cash flows from investing activities
Capital expenditures	(658)		(386)
Proceeds from purchase price refund	—		32
Payments for acquired businesses	(3)		(8)
Purchases of investments	(10)		(40)
Settlement of net investment hedges	108		(175)
Net cash flows used for investing activities	(563)		(577)
Cash flows from financing activities
Repayments of current debt, net	(4)		(746)
Proceeds from issuance of long-term debt, net	—		596
Debt issuance costs	(1)		(4)
Repayments and redemptions of long-term debt	(16)		(6)
Net proceeds from stock-based compensation transactions	127		180
Payments to acquire treasury stock	(1,998)		(316)
Dividends paid to stockholders	(624)		(561)
Payments to noncontrolling interest holders for dividends	—		(5)
Net cash flows used for financing activities	(2,516)		(862)
Effect of exchange rate changes on Cash and cash equivalents	(12)		39
Net increase (decrease) in Cash and cash equivalents	(1,122)		1,377
Cash and cash equivalents at beginning of period	4,958		5,022
Cash and cash equivalents at end of period	$	3,836	$	6,399

See notes to consolidated financial statements.

5

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation.

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $13 million and $(143) million, net of tax, during the three months ended March 31, 2022 and 2021, respectively, and $(182) million and $175 million, net of tax, during the nine months ended March 31, 2022 and 2021, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $3 million and $(3) million during the three months ended March 31, 2022 and March 31, 2021, respectively, and $(15) million and $(5) million during the nine months ended March 31, 2022 and 2021, respectively.

6

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

The Company’s largest customer during the three and nine months ended March 31, 2022 sells products primarily in China travel retail. This customer accounted for $740 million or 17%, and $690 million, or 18%, of the Company's consolidated net sales for the three months ended March 31, 2022 and 2021, respectively, and $1,792 million, or 13%, and $1,898 million, or 15%, for the nine months ended March 31, 2022 and 2021, respectively. This customer accounted for $457 million, or 20%, and $179 million, or 10%, of the Company's accounts receivable at March 31, 2022 and June 30, 2021, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Raw materials	$	778	$	674
Work in process	336		330
Finished goods	1,454		1,213
Promotional merchandise	262		288
	$	2,830	$	2,505

Property, Plant and Equipment

Property, plant and equipment consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Assets (Useful Life)
Land	$	56	$	55
Buildings and improvements (10 to 40 years)	496		256
Machinery and equipment (3 to 10 years)	992		920
Computer hardware and software (4 to 10 years)	1,428		1,303
Furniture and fixtures (5 to 10 years)	129		125
Leasehold improvements	2,307		2,312
Construction in progress	589		647
	5,997		5,618
Less accumulated depreciation and amortization	(3,504)		(3,338)
	$	2,493	$	2,280

Depreciation and amortization of property, plant and equipment was $140 million and $129 million during the three months ended March 31, 2022 and 2021, respectively, and $406 million and $380 million during the nine months ended March 31, 2022 and 2021, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

7

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Leases

The Company recognized $33 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the three and nine months ended March 31, 2021. The fiscal 2021 impairments related to other assets (i.e. rights associated with commercial operating leases), operating lease right-of-use assets and the related property, plant and equipment in certain freestanding stores primarily in Europe. The impairments were due to the negative impacts of the COVID-19 pandemic. For the three and nine months ended March 31, 2022, the Company did not recognize any long-lived asset impairments.

Income Taxes

The effective rate for income taxes for the three and nine months ended March 31, 2022 and 2021 are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
	2022		2021		2022		2021
Effective rate for income taxes	18.5	%	21.0	%	21.1	%	18.5	%
Basis-point change from the prior-year period	(250)				260

The effective tax rate for the three and nine months ended March 31, 2021 included the retroactive impact relating to fiscal 2020 and 2019 of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. The impact of the final issuance of GILTI tax regulations with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second and third quarters of fiscal 2021 and resulted in reductions of 30 basis points and 220 basis points to the effective tax rates for the three and nine months ended March 31, 2021, respectively.

For the three months ended March 31, 2022, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations, partially offset by a decrease in excess tax benefits associated with stock-based compensation arrangements.

For the nine months ended March 31, 2022, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company’s foreign operations, which includes the retroactive impact of the final GILTI tax regulations recognized in the prior period. Also contributing to the increase was a decrease in excess tax benefits associated with stock-based compensation arrangements.

As of March 31, 2022 and June 30, 2021, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $63 million and $62 million, respectively. The total amount of unrecognized tax benefits at March 31, 2022 that, if recognized, would affect the effective tax rate was $53 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2022 in the accompanying consolidated statements of earnings was $1 million and $5 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021, was $15 million and $14 million, respectively. On the basis of the information available as of March 31, 2022, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

During the fiscal 2022 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2020 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and nine months ended March 31, 2022.

8

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Accrued and Noncurrent Liabilities

Other accrued liabilities consist of the following:

(In millions)	March 31, 2022		June 30, 2021
Advertising, merchandising and sampling	$	322	$	294
Employee compensation	582		670
Deferred revenue	313		322
Payroll and other non-income taxes	321		359
Accrued income taxes	299		237
Other	1,450		1,313
	$	3,287	$	3,195

At March 31, 2022 and June 30, 2021, total Other noncurrent liabilities of $1,758 million and $2,037 million included $744 million and $849 million of deferred tax liabilities, respectively.

Recently Adopted Accounting Standards

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter.

Impact on consolidated financial statements – On July 1, 2021, the Company adopted this standard and recorded a cumulative adjustment of $121 million as an increase to its fiscal 2022 opening retained earnings balance to derecognize a deferred tax liability related to a previously held equity method investment that became a foreign subsidiary.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848 “ASC 848”)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform.

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company currently has an implementation team in place that is performing a comprehensive evaluation and assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company does not expect any qualifying contract modifications related to reference rate reform and therefore does not expect that the optional guidance in ASC 848 will need to be applied through December 31, 2022. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2022.

9

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

NOTE 2 – ACQUISITION OF BUSINESS

On May 18, 2021, the Company acquired additional shares in Deciem Beauty Group Inc. (“DECIEM”), a Toronto-based skin care company, for $1,092 million in cash, including proceeds from the issuance of debt. DECIEM is a multi-brand beauty company with a brand portfolio that includes The Ordinary and NIOD. This acquisition is expected to further strengthen the Company’s leadership position in prestige skin care, expand its global consumer reach and complement its business in the online and specialty-multi channels. The Company originally acquired a minority interest in DECIEM in June 2017. The minority interest was accounted for as an equity method investment, which had a carrying value of $65 million at the acquisition date. The acquisition of additional shares increased the Company's fully diluted equity interest from approximately 29% to approximately 76% and was considered a step acquisition. On a fully diluted basis, the DECIEM stock options, discussed below, approximated 4% of the total capital structure. Accordingly, for purposes of determining the consideration transferred, the Company excluded the DECIEM stock options, which resulted in an increase in the Company’s post-acquisition undiluted equity interest from approximately 30% to approximately 78% and the post-acquisition undiluted equity interest of the remaining noncontrolling interest holders of approximately 22%. The Company remeasured the previously held equity method investment to its fair value of $913 million, resulting in the recognition of a gain of $848 million. As part of the increase in the Company's investment, the Company was granted the right to purchase (“Call Option”), and granted the remaining investors a right to sell to the Company (“Put Option”), the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM (the “net Put (Call) Option”). As a result of this redemption feature, the Company recorded redeemable noncontrolling interest, at its acquisition‑date fair value, that is classified as mezzanine equity in the consolidated balance sheets at June 30, 2021. The accounting for the DECIEM business combination was finalized as of March 31, 2022.

A summary of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2022, is as follows:

(In millions)	March 31, 2022
Cash paid	$	1,095
Fair value of DECIEM stock options liability	104
Fair value of net Put (Call) Option	233
Total consideration for the acquired ownership interest (approximately 47.9%)	1,432
Fair value of previously held equity method investment (approximately 30.5%)	913
Fair value of redeemable noncontrolling interest (approximately 21.6%)	647
Total consideration transferred (100%)	$	2,992

As part of the acquisition of additional shares, DECIEM stock options were issued in replacement of and exchange for certain vested and unvested stock options previously issued by DECIEM. The total fair value of the DECIEM stock options of $295 million was recorded as part of the total consideration transferred, comprising of $191 million of Cash paid for vested options settled as of the acquisition date and $104 million reported as a stock options liability on the Company's consolidated balance sheet as it is not an assumed liability of DECIEM and is expected to be settled in cash upon completion of the exercise of the Put (Call). The acquisition-date fair value of the DECIEM stock options liability was calculated by multiplying the acquisition-date fair value by the number of DECIEM stock options replaced the day after the acquisition date. The stock options replaced consist of vested and partially vested stock options. See Note 10 – Stock Programs for information relating to the DECIEM stock options.

The acquisition-date fair value of the previously held equity method investment was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,992 million by the related effective previously held equity interest of approximately 30.5%.

The acquisition-date fair value of the redeemable noncontrolling interest includes the acquisition-date fair value of the net Put (Call) Option of $233 million. The remaining acquisition-date fair value of the redeemable noncontrolling interest of $647 million was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,992 million by the related noncontrolling interest of approximately 21.6%.

10

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquisition-date fair values of the DECIEM stock options and the net Put (Call) Option were calculated by incorporating significant assumptions including the starting equity value, revenue growth rates and EBITDA and the following key assumptions into the Monte Carlo Method:

	May 18, 2021
Risk-free rate	0.50%
Term to mid of last twelve-month period	2.54 years
Operating leverage adjustment	0.45
Net sales discount rate	3.30%
EBITDA discount rate	6.80%
EBITDA volatility	38.30%
Net sales volatility	17.20%

The Company recorded a preliminary allocation of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The total consideration transferred includes the cash paid at closing, the fair value of its previously held equity method investment, the fair value of the redeemable noncontrolling interest, including the fair value of the net Put (Call) Option, and the fair value of the DECIEM stock options liability. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. To determine the acquisition date estimated fair value of intangible assets acquired, the Company applied the income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for trademarks. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted-average cost of capital used to discount future cash flows, and a customer attrition rate for customer relationships and royalty rates for trademarks. The final allocation of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2022, has been recorded as follows:

(In millions)	March 31, 2022
Cash	$	35
Accounts receivable	64
Inventory	190
Other current assets	33
Property, plant and equipment	40
Operating lease right-of-use assets	40
Intangible assets	1,917
Goodwill	1,296
Deferred income taxes	8
Total assets acquired	3,623
Accounts payable	21
Operating lease liabilities	8
Other accrued liabilities	78
Deferred income taxes	479
Long-term operating lease liabilities	45
Total liabilities assumed	631
Total consideration transferred	$	2,992

11

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The results of operations for DECIEM and acquisition-related costs were not material to the Company's consolidated statements of earnings for the three and nine months ended March 31, 2022. Pro forma results of operations for the fiscal 2021 periods reflecting the acquisition of DECIEM are not presented, as the impact on the Company’s consolidated financial results would not have been material.

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

As previously discussed in Note 2 – Acquisition of Business, in May 2021 the Company increased its investment in DECIEM, which resulted in the inclusion of additional goodwill of $1,296 million, amortizable intangible assets (customer lists) of $701 million with amortization periods of 7 years to 14 years, and non-amortizable intangible assets (trademarks) of $1,216 million. Goodwill associated with the acquisition is primarily attributable to the future revenue growth opportunities associated with sales growth in the skin care category, as well as the value associated with DECIEM's assembled workforce. As such, the goodwill has been allocated to the Company’s skin care product category. The goodwill recorded in connection with this acquisition is not deductible for tax purposes.

Goodwill

The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2021
Goodwill	$	1,786	$	1,214	$	262	$	355	$	3,617
Accumulated impairments	(141)		(830)		(30)		—		(1,001)
	1,645		384		232		355		2,616
Goodwill measurement period adjustment	13		—		—		—		13
Translation adjustments, goodwill	(34)		—		(6)		—		(40)
Translation adjustments, accumulated impairments	2		—		—		—		2
	(19)		—		(6)		—		(25)
Balance as of March 31, 2022
Goodwill	1,765		1,214		256		355		3,590
Accumulated impairments	(139)		(830)		(30)		—		(999)
	$	1,626	$	384	$	226	$	355	$	2,591

Other Intangible Assets

Other intangible assets consist of the following:

	March 31, 2022						June 30, 2021
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	2,208	$	660	$	1,548	$	2,273	$	544	$	1,729
License agreements	43		43		—		43		43		—
	$	2,251	$	703	1,548		$	2,316	$	587	1,729
Non-amortizable intangible assets:
Trademarks and other					2,090						2,366
Total intangible assets					$	3,638					$	4,095

12

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aggregate amortization expense related to amortizable intangible assets was $38 million and $25 million for the three months ended March 31, 2022 and 2021, respectively, and $122 million and $77 million for the nine months ended March 31, 2022 and 2021, respectively.

The estimated aggregate amortization expense for the remainder of fiscal 2022 and for each of the next four fiscal years is as follows:

	Fiscal
(In millions)	2022		2023		2024		2025		2026
Estimated aggregate amortization expense	$	39	$	155	$	154	$	154	$	154

Impairment Testing During the Nine Months Ended March 31, 2022

During the fiscal 2022 third quarter, given the lower-than-expected results from international expansion to areas that continue to be impacted by COVID-19, the Company made revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. As of March 31, 2022, the remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $11 million reducing the carrying value to zero.

During the fiscal 2022 third quarter, given the lower-than-expected growth within key geographic regions and channels for Dr.Jart+ that continue to be impacted by the spread of COVID-19 variants and resurgence in cases and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, the lower than expected growth in key retail channels for DECIEM, and the lower than expected results from international expansion to areas that continue to be impacted by COVID-19 for Too Faced, the Company made revisions to the internal forecasts relating to its Dr. Jart+, DECIEM and Too Faced reporting units.

The Company concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022. The Company concluded that the carrying amounts of the long-lived assets were recoverable. For the Dr.Jart+ reporting unit, the Company also concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge. For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, the Company did not record impairment charges. As of March 31, 2022, the estimated fair values of Too Faced’s and DECIEM's trademarks exceeded their carrying values by 13% and 3%, respectively. For the Too Faced and DECIEM trademark intangible assets, if all other assumptions are held constant, an increase of 100 basis points and 50 basis points, respectively, in the weighted average cost of capital would result in an impairment charge. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair value of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair value of the Dr. Jart+ trademark intangible asset was the weighted-average cost of capital, which was 10.5%.

13

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the impairment charges for the three and nine months ended March 31, 2022 and the remaining trademark and goodwill carrying values as of March 31, 2022, for each reporting unit, are as follows:

(In millions)		Impairment Charge				Carrying Value
Reporting Unit:	Geographic Region	Trademarks		Goodwill		Trademarks		Goodwill
GLAMGLOW	The Americas	$	11	$	—	$	—	$	—
Dr. Jart+	Asia/Pacific	205		—		486		332
Total		$	216	$	—	$	486	$	332

The impairment charges for the three and nine months ended March 31, 2022 were reflected in the skin care product category.

Impairment Testing During the Nine Months Ended March 31, 2021

During November 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company and lower than expected results from geographic expansion, the Company made further revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020. The Company concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $21 million. In addition, the Company concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $6 million. The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020. After adjusting the carrying values of the trademark and customer lists intangible assets, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The impairment charges for the nine months ended March 31, 2021 were reflected in the skin care product category and in the Americas region. As of March 31, 2021, the remaining carrying value of the trademark related to the GLAMGLOW reporting unit was $36 million.

NOTE 4 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Charges associated with the Post-COVID Business Acceleration Program for the three and nine months ended March 31, 2022 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Three months ended March 31, 2022	$	1	$	—	$	17	$	1	$	19
Nine months ended March 31, 2022	$	3	$	(2)	$	24	$	6	$	31

Charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.

14

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Post-COVID Business Acceleration Program

On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign the Company's business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.

The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of the Company’s distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.

As of March 31, 2022, the Company estimates a net reduction over the duration of the PCBA Program in the range of 2,000 to 2,500 positions globally, including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. The Company also estimates the closure over the duration of the PCBA Program of approximately 10% to 15% of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.

The Company plans to approve specific initiatives under the PCBA Program through fiscal 2022 and expects to substantially complete those initiatives through fiscal 2023. The Company expects that the PCBA Program will result in related restructuring and other charges totaling between $400 million and $500 million, before taxes.

PCBA Program Approvals

Total PCBA Program cumulative charges (adjustments) approved by the Company through March 31, 2022 were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Cumulative through June 30, 2021	$	42	$	(6)	$	257	$	21	$	314
Nine months ended March 31, 2022	(19)		9		5		2		(3)
Cumulative through March 31, 2022	$	23	$	3	$	262	$	23	$	311

Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through March 31, 2022 by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2021	$	132	$	108	$	13	$	4	$	257
Nine months ended March 31, 2022	3		4		(1)		(1)		5
Cumulative through March 31, 2022	$	135	$	112	$	12	$	3	$	262

15

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Specific actions taken since the PCBA Program inception include:

•Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels in certain areas of its distribution network and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores, counters and other retail locations, mainly in certain affiliates across all geographic regions, including the Company's travel retail network. These anticipated closures reflect changing consumer behaviors including higher demand for online and omnichannel capabilities. These activities will result in a net reduction in workforce, inventory and other asset write-offs, product returns, and termination of contracts.

•Optimize Digital Organization and Other Go-To-Market Organizations – The Company approved initiatives to enhance its go-to-market capabilities and shift more resources to support online growth. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities.

•Optimize Select Marketing, Brand and Global Functions – The Company has started to reduce its corporate office footprint and is moving toward the future of work in a post-COVID environment, by restructuring where and how its employees work and collaborate. These actions will result primarily in lease termination fees.

•Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and the sustainability of long-term investments, the decision was made to exit the global distribution of BECCA products due to its limited distribution, the ongoing decline in product demand and the challenging environment caused by the COVID-19 pandemic. These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance. The Company expects to substantially complete these initiatives during fiscal 2022.

•Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it is not renewing its existing license agreements for Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna when they expire in June 2023. The Company expects to continue to sell products under these licenses through June 30, 2022. These actions resulted in, or are expected to result in, employee-related costs, asset write-offs, including charges for the impairment of goodwill, and consulting and legal fees.

PCBA Program Restructuring and Other Charges

Restructuring charges are comprised of the following:

Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.

Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets in certain freestanding stores (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. These costs also include goodwill and other intangible asset impairment charges relating to the exit of the global distribution of BECCA products.

Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration.

Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees.

16

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other charges associated with restructuring activities are comprised of the following:

Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured.

Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating expenses as incurred and primarily include the following:

•Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof;

•Temporary labor backfill;

•Costs to establish and maintain a PMO for the duration of the PCBA Program, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities); and

•Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative.

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments)
Cumulative through June 30, 2021	$	14	$	2	$	201	$	4	$	221
Nine months ended March 31, 2022	3		(2)		24		6		31
Cumulative through March 31, 2022	$	17	$	—	$	225	$	10	$	252

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2021	$	119	$	75	$	6	$	1	$	201
Nine months ended March 31, 2022	5		7		11		1		24
Cumulative through March 31, 2022	$	124	$	82	$	17	$	2	$	225

17

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in accrued restructuring charges for the nine months ended March 31, 2022 relating to the PCBA Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2021	$	101	$	—	$	—	$	—	$	101
Charges	5		7		11		1		24
Cash payments	(39)		—		(11)		(1)		(51)
Non-cash asset write-offs	—		(7)		—		—		(7)
Translation and other adjustments	(7)		—		—		—		(7)
Balance at March 31, 2022	$	60	$	—	$	—	$	—	$	60

Accrued restructuring charges at March 31, 2022 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $23 million, $30 million and $7 million for the remainder of fiscal 2022 and for fiscal 2023 and 2024, respectively.

Between April 1, 2022 and April 26, 2022, the Company approved certain initiatives under the PCBA Program within areas of Optimize Distribution Network and Optimize Select Marketing, Brand and Global Functions. These initiatives pertain primarily to asset write-offs to close an underperforming freestanding store and the optimization of where and how employees work and collaborate.

Once the relevant accounting criteria have been met, the Company expects to record restructuring and other charges of approximately $50 million (before tax) in connection with these initiatives.

The following presents the restructuring initiatives approved from April 1, 2022 to April 26, 2022 by major cost type:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Approval Period
April 1, 2022 - April 26, 2022	$	—	$	—	$	50	$	—	$	50

Included in the above table, cumulative restructuring initiatives approved by the Company from April 1, 2022 to April 26, 2022 were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Approval Period
April 1, 2022 - April 26, 2022	$	—	$	34	$	16	$	—	$	50

Leading Beauty Forward Program

The Company substantially completed initiatives approved under the Leading Beauty Program (the “LBF Program”) through fiscal 2021. Additional information about the LBF Program is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

18

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – DERIVATIVE FINANCIAL INSTRUMENTS

The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. The Company enters into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At March 31, 2022, the notional amount of derivatives not designated as hedging instruments was $3,887 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.

For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively.

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value (1)					Fair Value (1)
(In millions)	Balance Sheet Location	March 31, 2022		June 30, 2021		Balance Sheet Location	March 31, 2022		June 30, 2021
Derivatives Designated as Hedging Instruments:
Foreign currency cash flow hedges	Prepaid expenses and other current assets	$	21	$	12	Other accrued liabilities	$	22	$	20
Net investment hedges	Prepaid expenses and other current assets	15		34		Other accrued liabilities	—		—
Interest rate-related derivatives	Prepaid expenses and other current assets	10		15		Other accrued liabilities	71		—
Total Derivatives Designated as Hedging Instruments		46		61			93		20
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	23		6		Other accrued liabilities	25		36
Total derivatives		$	69	$	67		$	118	$	56

(1)See Note 6 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

19

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Earnings	Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
	Three Months Ended March 31					Three Months Ended March 31
(In millions)	2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(2)	$	22	Net sales	$	3	$	(7)
Interest rate-related derivatives	10		11		Interest expense	—		(1)
	8		33			3		(8)
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	17		125			—		—
Total derivatives	$	25	$	158		$	3	$	(8)

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the three months ended March 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $3 million and $5 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Earnings	Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
	Nine Months Ended March 31					Nine Months Ended March 31
(In millions)	2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	5	$	(43)	Net sales	$	(5)	$	(11)
Interest rate-related derivatives	10		14		Interest expense	(1)		(2)
	15		(29)			(6)		(13)
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	87		(17)			—		—
Total derivatives	$	102	$	(46)		$	(6)	$	(13)

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the nine months ended March 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $8 million and $15 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

20

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

		Amount of Gain (Loss) Recognized in Earnings on Derivatives (1)
	Location of Gain (Loss) Recognized in Earnings on Derivatives
		Three Months Ended March 31				Nine Months Ended March 31
(In millions)		2022		2021		2022		2021
Derivatives in Fair Value Hedging Relationships:
Interest rate swap contracts	Interest expense	$	(69)	$	(18)	$	(85)	$	(23)

(1)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions)
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included	Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability
	March 31, 2022		March 31, 2022
Current debt	$	251	$	1
Long-term debt	921		(71)
Total debt	$	1,172	$	(70)

21

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

	Three Months Ended March 31
	2022				2021
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	4,245	$	41	$	3,864	$	43
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		69		Not applicable		18
Derivatives designated as hedging instruments	Not applicable		(69)		Not applicable		(18)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		—		Not applicable		(1)
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	3		Not applicable		(7)		Not applicable

22

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Nine Months Ended March 31
	2022				2021
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	14,176	$	125	$	12,279	$	131
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		85		Not applicable		23
Derivatives designated as hedging instruments	Not applicable		(85)		Not applicable		(23)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		(1)		Not applicable		(2)
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(5)		Not applicable		(11)		Not applicable

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

		Amount of Gain (Loss) Recognized in Earnings on Derivatives
	Location of Gain (Loss) Recognized in Earnings on Derivatives	Three Months Ended March 31				Nine Months Ended March 31
(In millions)		2022		2021		2022		2021
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Selling, general and administrative	$	17	$	(97)	$	(32)	$	(34)

23

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedges

The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of December 2023. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At March 31, 2022, the Company had cash flow hedges outstanding with a notional amount totaling $1,563 million.

The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.

For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses in AOCI are reclassified to sales when the underlying forecasted transaction occurs. If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period sales. As of March 31, 2022, the Company’s foreign currency cash flow hedges were highly effective.

The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of March 31, 2022 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $1 million. The accumulated net gain (loss) on derivative instruments in AOCI was $20 million and $(1) million as of March 31, 2022 and June 30, 2021, respectively.

Fair Value Hedges

The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. The Company has interest rate swap agreements, with notional amounts totaling $250 million, $700 million and $300 million to effectively convert the fixed rate interest on its 2022 Senior Notes, 2030 Senior Notes and 2031 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Net Investment Hedges

The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of July 2022. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At March 31, 2022, the Company had net investment hedges outstanding with a notional amount totaling $1,372 million.

Credit Risk

As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $69 million at March 31, 2022. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote.

24

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – FAIR VALUE MEASUREMENTS

The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1:    Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:    Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:    Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	1,019	$	—	$	—	$	1,019
Foreign currency forward contracts	—		59		—		59
Interest rate-related derivatives	—		10		—		10
Total	$	1,019	$	69	$	—	$	1,088
Liabilities:
Foreign currency forward contracts	$	—	$	47	$	—	$	47
Interest rate-related derivatives	—		71		—		71
DECIEM stock options	—		—		74		74
Total	$	—	$	118	$	74	$	192

25

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,079	$	—	$	—	$	2,079
Foreign currency forward contracts	—		52		—		52
Interest rate-related derivatives	—		15		—		15
Total	$	2,079	$	67	$	—	$	2,146
Liabilities:
Foreign currency forward contracts	$	—	$	56	$	—	$	56
DECIEM stock options	—		—		141		141
Total	$	—	$	56	$	141	$	197

The estimated fair values of the Company’s financial instruments are as follows:

	March 31, 2022				June 30, 2021
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	3,836	$	3,836	$	4,958	$	4,958
Current and long-term debt	5,457		5,607		5,569		6,262
DECIEM stock options	74		74		141		141
Derivatives
Foreign currency forward contracts – asset (liability), net	12		12		(4)		(4)
Interest rate-related derivatives – asset (liability), net	(61)		(61)		15		15

26

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s impairment charges for the nine months ended March 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value(1)
Other intangible assets, net (trademarks)
GLAMGLOW	$	11	March 31, 2022	$	—
Dr. Jart+	205		February 28, 2022	486
Total	216			486
Total	$	216		$	486

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the nine months ended March 31, 2021 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value(1)
Goodwill
GLAMGLOW	$	54	November 30, 2020	$	—
BECCA(2)	13		February 28, 2021	—
Total	67			—
Other intangible assets, net (trademark and customer lists)
GLAMGLOW	27		November 30, 2020	36
BECCA(2)	34		February 28, 2021	—
Total	61			36
Long-lived assets	33		March 31, 2021	35
Total	$	161		$	71

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

(2)See Note 4 – Charges Associated with Restructuring and Other Activities for further information relating to goodwill and other intangible asset impairment charges recorded in connection with the exit of the global distribution of BECCA products.

The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value due to the short maturity of cash equivalent instruments.

27

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months.

Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services.

Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy.

DECIEM stock options – The stock option liability represents the employee stock options issued by DECIEM in replacement and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM, in connection with the Company's acquisition of DECIEM. The DECIEM stock options are subject to the terms and conditions of DECIEM's 2021 Stock Option Plan. The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date. The acquisition date fair value was calculated using the Monte Carlo Method, which requires certain assumptions. Significant changes in the projected future operating results would result in a higher or lower fair value measurement. Changes to the discount rates or volatilities would have a lesser effect. These inputs are categorized as Level 3 of the valuation hierarchy. The DECIEM stock options are remeasured to fair value at each reporting date through the period when the options are exercised or repurchased (i.e., when they are settled), with an offsetting entry to compensation expense. See Note 2 – Acquisition of Business and Note 10 – Stock Programs for discussion.

Changes in the DECIEM stock option liability for the nine months ended March 31, 2022 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions)	Fair Value
DECIEM stock option liability as of June 30, 2021	$	141
Changes in fair value, net of foreign currency remeasurements(1)	(58)
Translation adjustments and other, net	(9)
DECIEM stock option liability as of March 31, 2022	$	74

(1)Amount includes expense attributable to graded vesting of stock options which is not material for the nine months ended March 31, 2022.

NOTE 7 – REVENUE RECOGNITION

The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Accounts Receivable

Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $36 million and $40 million as of March 31, 2022 and June 30, 2021, respectively. Payment terms are short-term in nature and are generally less than one year.

28

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the allowance for credit losses are as follows:

(In millions)	March 31, 2022
Balance at June 30, 2021	$	20
Adjustment for expected credit losses	(2)
Write-offs, net & other	(1)
Balance at March 31, 2022	$	17

The remaining balance of the allowance for doubtful accounts of $19 million, as of March 31, 2022, relates to non-credit losses, which are primarily due to customer deductions.

Deferred Revenue

Changes in deferred revenue during the period are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Deferred revenue, beginning of period	$	421	$	420	$	371	$	279
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(40)		(25)		(288)		(198)
Revenue deferred (released) during the period	(13)		(30)		285		278
Other	(4)		(4)		(4)		2
Deferred revenue, end of period	$	364	$	361	$	364	$	361

Transaction Price Allocated to the Remaining Performance Obligations

At March 31, 2022, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $313 million. The remaining balance of deferred revenue at March 31, 2022 will be recognized beyond the next twelve months.

NOTE 8 – PENSION AND POST-RETIREMENT BENEFIT PLANS

The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

The components of net periodic benefit cost for the three months ended March 31, 2022 and 2021 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2022		2021		2022		2021		2022		2021
Service cost	$	12	$	12	$	8	$	9	$	1	$	2
Interest cost	8		8		3		2		1		1
Expected return on plan assets	(14)		(14)		(4)		(4)		—		(1)
Amortization of:
Actuarial loss	4		5		—		1		—		—
Prior service cost	—		—		—		—		—		—
Settlements	—		—		—		1		—		—
Special termination benefits	—		—		1		1		—		—
Net periodic benefit cost	$	10	$	11	$	8	$	10	$	2	$	2

29

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of net periodic benefit cost for the nine months ended March 31, 2022 and 2021 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2022		2021		2022		2021		2022		2021
Service cost	$	35	$	34	$	24	$	27	$	2	$	2
Interest cost	23		23		8		7		4		4
Expected return on plan assets	(41)		(40)		(11)		(10)		(1)		(1)
Amortization of:
Actuarial loss	11		15		1		3		1		—
Prior service cost	—		—		(1)		—		—		—
Settlements	—		—		—		1		—		—
Special termination benefits	—		—		4		10		—		—
Net periodic benefit cost	$	28	$	32	$	25	$	38	$	6	$	5

During the nine months ended March 31, 2022, the Company made contributions to its international pension plans totaling $17 million.

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions)	March 31, 2022		June 30, 2021
Other assets	$	142	$	162
Other accrued liabilities	(28)		(28)
Other noncurrent liabilities	(426)		(432)
Funded status	(312)		(298)
Accumulated other comprehensive loss	229		242
Net amount recognized	$	(83)	$	(56)

NOTE 9 – CONTINGENCIES

Legal Proceedings

The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including employment, intellectual property, real estate, environmental, regulatory, advertising, trade relations, tax, privacy, and product liability matters (including asbestos-related claims). Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements.

30

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – STOCK PROGRAMS

Additional information relating to the Company's stock programs and the DECIEM stock options are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

The Company's Stock Programs

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units and share units. Compensation expense attributable to net stock-based compensation was $91 million and $86 million for the three months ended March 31, 2022 and 2021, respectively, and was $283 million and $255 million for the nine months ended March 31, 2022 and 2021, respectively.

Stock Options

During the nine months ended March 31, 2022, the Company granted stock options in respect of approximately 1.1 million shares of Class A Common Stock with an exercise price per share of $344.09 and a weighted-average grant date fair value per share of $85.56. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2022 was $248 million.

Restricted Stock Units

The Company granted RSUs in respect of approximately 0.7 million shares of Class A Common Stock during the nine months ended March 31, 2022 with a weighted-average grant date fair value per share of $340.18 that, at the time of grant, are scheduled to vest at 0.2 million, 0.2 million, and 0.3 million shares per year, in fiscal 2023, fiscal 2024 and fiscal 2025, respectively. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant.

Performance Share Units

During the nine months ended March 31, 2022, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $344.06, which will be settled in stock subject to the achievement of the Company’s net sales and diluted net earnings per common share for the three fiscal years ending June 30, 2024, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant.

In September 2021, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.2 million PSUs with a performance period ended June 30, 2021.

DECIEM Stock Options

The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are remeasured to fair value at each reporting date through date of settlement. Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options. Due to a reduction in the fair value of the DECIEM stock options, the total stock option expense for the three and nine months ended March 31, 2022 resulted in income of $60 million and $58 million, respectively, net of foreign currency remeasurements. There were no DECIEM stock options exercised during the nine months ended March 31, 2022.

31

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date. As discussed in Note 2 – Acquisition of Business, DECIEM stock options, with total fair value of $295 million, were reported as part of the total consideration transferred. The DECIEM stock options are reported as a stock option liability of $74 million and $141 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021, respectively. The fair value of the stock options were calculated using the following key assumptions into the Monte Carlo Method:

	March 31, 2022	June 30, 2021	May 18, 2021
Risk-free rate	1.80%	0.50%	0.50%
Term to mid of last twelve-month period	1.67 years	2.42 years	2.54 years
Operating leverage adjustment	0.45	0.45	0.45
Net sales discount rate	5.00%	3.40%	3.30%
EBITDA discount rate	8.90%	6.90%	6.80%
EBITDA volatility	34.00%	37.70%	38.30%
Net sales volatility	15.30%	17.00%	17.20%

NOTE 11 – NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE

Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met. Net earnings attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards.

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

	Three Months Ended March 31				Nine Months Ended March 31
(In millions, except per share data)	2022		2021		2022		2021
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$	558	$	456	$	2,338	$	1,852
Denominator:
Weighted-average common shares outstanding – Basic	359.2		363.6		360.7		362.9
Effect of dilutive stock options	3.5		4.1		3.9		3.9
Effect of PSUs	0.2		0.2		0.2		0.2
Effect of RSUs	0.7		1.1		1.0		1.1
Weighted-average common shares outstanding – Diluted	363.6		369.0		365.8		368.1
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic	$	1.55	$	1.25	$	6.48	$	5.10
Diluted	$	1.53	$	1.24	$	6.39	$	5.03

32

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows:

	Three Months Ended March 31		Nine Months Ended March 31
(In millions)	2022	2021	2022	2021
Stock options	1.0	—	0.8	0.9
RSUs and PSUs	—	—	0.1	0.1

As of March 31, 2022 and 2021, 0.7 million and 0.9 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 10 – Stock Programs.

33

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

Total Stockholders’ Equity – The Estée Lauder Companies Inc.

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Common stock, beginning of the period	$	6	$	6	$	6	$	6
Stock-based compensation	—		—		—		—
Common stock, end of the period	6		6		6		6
Paid-in capital, beginning of the period	5,605		5,068		5,335		4,790
Common stock dividends	2		1		3		2
Stock-based compensation	139		162		408		439
Paid-in capital, end of the period	5,746		5,231		5,746		5,231
Retained earnings, beginning of the period	13,735		11,159		12,244		10,134
Common stock dividends	(217)		(195)		(627)		(563)
Net earnings attributable to The Estée Lauder Companies Inc.	558		456		2,338		1,852
Cumulative effect of adoption of new accounting standards	—		—		121		(3)
Retained earnings, end of the period	14,076		11,420		14,076		11,420
Accumulated other comprehensive loss, beginning of the period	(646)		(383)		(470)		(665)
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc.	20		(104)		(156)		178
Accumulated other comprehensive loss, end of the period	(626)		(487)		(626)		(487)
Treasury stock, beginning of the period	(12,482)		(10,429)		(11,058)		(10,330)
Acquisition of treasury stock	(568)		(212)		(1,850)		(212)
Stock-based compensation	(2)		(1)		(144)		(100)
Treasury stock, end of the period	(13,052)		(10,642)		(13,052)		(10,642)
Total stockholders’ equity – The Estée Lauder Companies Inc.	6,150		5,528		6,150		5,528
Noncontrolling interests, beginning of the period	34		35		34		27
Net earnings attributable to noncontrolling interests	3		2		8		8
Distribution to noncontrolling interest holders	—		(6)		—		(6)
Translation adjustments and other, net	(1)		(1)		(6)		1
Noncontrolling interests, end of the period	36		30		36		30
Total equity	$	6,186	$	5,558	$	6,186	$	5,558
Redeemable noncontrolling interest, beginning of the period	$	840	$	—	$	857	$	—
Net earnings attributable to redeemable noncontrolling interest	12		—		12		—
Translation adjustments	14		—		(3)		—
Adjustment of redeemable noncontrolling interest to redemption value	(1)		—		(1)		—
Redeemable noncontrolling interest, end of the period	$	865	$	—	$	865	$	—
Cash dividends declared per common share	$	.60	$	.53	$	1.73	$	1.54

34

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2022:

Date Declared	Record Date	Payable Date	Amount per Share
August 18, 2021	August 31, 2021	September 15, 2021	$	.53
November 1, 2021	November 30, 2021	December 15, 2021	$	.60
February 2, 2022	February 28, 2022	March 15, 2022	$	.60

On May 2, 2022, a dividend was declared in the amount of $.60 per share on the Company’s Class A and Class B Common Stock. The dividend is payable in cash on June 15, 2022 to stockholders of record at the close of business on May 31, 2022.

Common Stock

During the nine months ended March 31, 2022, the Company purchased approximately 6.2 million shares of its Class A Common Stock for $1,998 million.

During the nine months ended March 31, 2022, 2.7 million shares of the Company’s Class B Common Stock were converted into the same amount of shares of the Company’s Class A Common Stock.

Accumulated Other Comprehensive Income

The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2022:

(In millions)	Net Cash Flow Hedge Gain (Loss)		Amounts Included in Net Periodic Benefit Cost			Translation Adjustments			Total
Balance at June 30, 2021	$	(2)	$	(179)		$	(289)		$	(470)
OCI before reclassifications	12		1		(1)	(182)		(2)	(169)
Amounts reclassified to Net earnings	4		9			—			13
Net current-period OCI	16		10			(182)			(156)
Balance at March 31, 2022	$	14	$	(169)		$	(471)		$	(626)

(1)Consists of foreign currency translation losses.

(2)See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

35

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and nine months ended March 31, 2022 and 2021:

	Amount Reclassified from AOCI								Affected Line Item in Consolidated Statements of Earnings
	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Gain (Loss) on Cash Flow Hedges
Foreign currency forward contracts	$	3	$	(7)	$	(5)	$	(11)	Net sales
Interest rate-related derivatives	—		(1)		(1)		(2)		Interest expense
	3		(8)		(6)		(13)
Benefit for deferred taxes	—		2		2		3		Provision for income taxes
	3		(6)		(4)		(10)		Net earnings
Retirement Plan and Other Retiree Benefit Adjustments
Amortization of prior service cost	—		—		1		—		Other components of net periodic benefit cost (1)
Amortization of actuarial loss	(4)		(6)		(13)		(18)		Other components of net periodic benefit cost (1)
Settlements	—		(1)		—		(1)		Other components of net periodic benefit cost (1)
	(4)		(7)		(12)		(19)
Benefit for deferred taxes	1		3		3		5		Provision for income taxes
	(3)		(4)		(9)		(14)		Net earnings
Total reclassification adjustments, net	$	—	$	(10)	$	(13)	$	(24)	Net earnings

(1)See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

NOTE 13 – STATEMENT OF CASH FLOWS

Supplemental cash flow information for the nine months ended March 31, 2022 and 2021 is as follows:

(In millions)	2022		2021
Cash:
Cash paid during the period for interest	$	110	$	108
Cash paid during the period for income taxes	$	626	$	435
Non-cash investing and financing activities:
Property, plant and equipment accrued but unpaid	$	110	$	68
Financing lease modifications	$	(13)	$	—
Right-of-use assets obtained in exchange for new/modified operating lease liabilities	$	179	$	167

36

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT DATA AND RELATED INFORMATION

Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and operating income (loss) before charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.

The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2021.

37

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	2,395	$	2,259	$	8,003	$	7,113
Makeup	1,114		1,018		3,674		3,243
Fragrance	579		454		1,987		1,478
Hair Care	147		128		475		418
Other	11		15		40		37
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	667	$	804	$	2,466	$	2,453
Makeup	7		(72)		228		(115)
Fragrance	105		47		446		248
Hair Care	(18)		(17)		(8)		(10)
Other	—		(1)		3		(1)
	761		761		3,135		2,575
Reconciliation:
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Interest expense	(41)		(43)		(125)		(131)
Interest income and investment income, net	5		9		19		40
Other components of net periodic benefit cost	1		(2)		2		(12)
Other income	—		—		1		—
Earnings before income taxes	$	703	$	580	$	2,988	$	2,281
GEOGRAPHIC DATA(1)
Net sales:
The Americas	$	1,053	$	916	$	3,547	$	2,837
Europe, the Middle East & Africa	1,990		1,706		6,201		5,276
Asia/Pacific	1,203		1,252		4,431		4,176
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Operating income:
The Americas	$	408	$	155	$	1,044	$	256
Europe, the Middle East & Africa	281		361		1,366		1,429
Asia/Pacific	72		245		725		890
	761		761		3,135		2,575
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Operating income	$	738	$	616	$	3,091	$	2,384

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

38

THE ESTÉE LAUDER COMPANIES INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and nine months ended March 31, 2022 and 2021, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category.

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
NET SALES
By Product Category:
Skin Care	$	2,395	$	2,259	$	8,003	$	7,113
Makeup	1,114		1,018		3,674		3,243
Fragrance	579		454		1,987		1,478
Hair Care	147		128		475		418
Other	11		15		40		37
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
By Region(1):
The Americas	$	1,053	$	916	$	3,547	$	2,837
Europe, the Middle East & Africa	1,990		1,706		6,201		5,276
Asia/Pacific	1,203		1,252		4,431		4,176
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
OPERATING INCOME (LOSS)
By Product Category:
Skin Care	$	667	$	804	$	2,466	$	2,453
Makeup	7		(72)		228		(115)
Fragrance	105		47		446		248
Hair Care	(18)		(17)		(8)		(10)
Other	—		(1)		3		(1)
	761		761		3,135		2,575
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Operating income	$	738	$	616	$	3,091	$	2,384
By Region(1):
The Americas	$	408	$	155	$	1,044	$	256
Europe, the Middle East & Africa	281		361		1,366		1,429
Asia/Pacific	72		245		725		890
	761		761		3,135		2,575
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Operating income	$	738	$	616	$	3,091	$	2,384

(1) The net sales from our travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

39

THE ESTÉE LAUDER COMPANIES INC.

The following table presents certain consolidated earnings data as a percentage of net sales:

	Three Months Ended March 31				Nine Months Ended March 31
	2022		2021		2022		2021
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	23.4		24.3		23.1		23.2
Gross profit	76.6		75.7		76.9		76.8
Operating expenses:
Selling, general and administrative	53.6		55.5		53.3		55.1
Restructuring and other charges	0.5		3.4		0.3		1.4
Goodwill impairment	—		—		—		0.4
Impairment of other intangible and long-lived assets	5.1		0.9		1.5		0.5
Total operating expenses	59.2		59.8		55.1		57.4
Operating income	17.4		15.9		21.8		19.4
Interest expense	1.0		1.1		0.9		1.1
Interest income and investment income, net	0.1		0.2		0.1		0.3
Other components of net periodic benefit cost	—		0.1		—		0.1
Other income	—		—		—		—
Earnings before income taxes	16.6		15.0		21.1		18.6
Provision for income taxes	(3.1)		(3.2)		(4.4)		(3.4)
Net earnings	13.5		11.9		16.6		15.1
Net earnings attributable to noncontrolling interests	(0.1)		(0.1)		(0.1)		(0.1)
Net earnings attributable to redeemable noncontrolling interest	(0.3)		—		(0.1)		—
Net earnings attributable to The Estée Lauder Companies Inc.	13.1	%	11.8	%	16.5	%	15.1	%

Not adjusted for differences caused by rounding

We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products may have some cannibalizing effect on sales of existing products, which we take into account in our business planning.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period helps investors and others compare operating performance between periods. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. See Reconciliations of Non-GAAP Financial Measures beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

40

THE ESTÉE LAUDER COMPANIES INC.

We operate on a global basis, with the majority of our net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, we present certain net sales, operating results and diluted net earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current-period results using prior-year period monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.

Overview

COVID-19 Business Update

The COVID-19 pandemic continued to disrupt our operating environment globally, primarily impacting retail traffic, travel, supply chain, inventory levels and other logistics during the three months ended March 31, 2022. The resurgence of COVID-19 cases in many Chinese provinces led to restrictions late in the fiscal 2022 third quarter to prevent further spread of the virus. Consequently, retail traffic, travel, and distribution capabilities were temporarily curtailed. Our distribution facilities in Shanghai operated with limited capacity to fulfill brick-and-mortar and online orders beginning in mid-March 2022.

Retail Impact

While most brick-and-mortar retail stores globally that sell our products, whether operated by us or our customers, were open during much of the third quarter of fiscal 2022, there were intermittent closures, primarily in mainland China, which had regional lockdowns. Globally, in areas where stores were open, consumer traffic has not recovered to the pre-pandemic levels.

International passenger traffic remained soft globally. However, passenger traffic in Europe, the Middle East & Africa and The Americas improved, although it remained significantly below pre-pandemic levels. The improvement was due to the partial lifting of COVID-19-related restrictions. In Asia/Pacific, traffic in Hainan was negatively impacted by fewer visitors due to intermittent domestic travel restrictions.

Consumer Preferences

The continuance of COVID-19 pandemic-related closures of offices, retail stores and other businesses and the significant decline in social gatherings have influenced consumer preferences and practices. While the demand for makeup has improved significantly in areas where restrictions have been lifted, it continues to be the only category that remains below the pre-pandemic period, given fewer makeup usage occasions and ongoing mask wearing, while skin care, fragrance and hair care have all grown from pre-pandemic levels.

Supply Chain

The COVID-19 pandemic has contributed to global supply chain disruptions, including manufacturing and transportation delays, due to closures, employee absences, port congestion, labor and container shortages, and shipment delays. As a result, we expect higher costs to negatively impact cost of sales and operating expenses for the remainder of fiscal 2022. We expect to mitigate some of the impact to our business and our costs through strategic price increases, product mix, timing of shipments, inventory levels, use of air freight and less congested ports, and cost savings in other areas. Toward the end of the third quarter of fiscal 2022, we began to experience challenges in logistics in China due to restrictions attributable to the COVID-19 pandemic.

41

THE ESTÉE LAUDER COMPANIES INC.

Business Update

We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services. Within prestige beauty, we are well diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. This diversification allows us to leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described in the Overview on pages 31-34 of our Annual Report on Form 10-K for the year ended June 30, 2021, as well as below.

During the third quarter of fiscal 2022, net sales increased 10%, reflecting early stages of a recovery in The Americas and in Europe, the Middle East & Africa as compared to a more difficult environment in the prior-year period. The net sales increase includes incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.

•Our skin care net sales benefited from the recent launch of The Hydrating Infused Emulsion from La Mer, as well as initial shipments of the brand's The Treatment Lotion and continued strength in its Crème de la Mer moisturizer. Incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter also contributed to growth.

•The COVID-19 pandemic has generally resulted in more limited social and business activities and consumers overall wore less makeup. As restrictions lift and stores reopen in particular locations, we generally see demand for makeup products increasing. During the third quarter of fiscal 2022, net sales in makeup grew double digits in part due to this, and was also driven by strong activations, expanded consumer reach and the launch of MACStack mascara from M·A·C, increases in Estée Lauder foundation products, as well as a strong performance from Clinique. Our brands generated interest in makeup through virtual marketing efforts such as classes, virtual try-on technology and greater emphasis on social media platforms.

•Our fragrance net sales rose sharply as consumers gravitated to high-end and artisanal offerings from Jo Malone London, Tom Ford Beauty, and Le Labo.

•Our hair care net sales also grew double digits, reflecting increases from both Aveda and Bumble and bumble as brick-and-mortar channels recover, online growth continues and new products launch.

In September 2021, we announced that we are not renewing our existing license agreements for Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna when they expire in June 2023. We expect to continue to sell products under these licenses through June 30, 2022.

Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are the most attractive. Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications. We are evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories. We tailor implementation of our strategy by market to drive consumer engagement and embrace cultural diversity. We continuously strive to strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.

•The increase in net sales during the fiscal 2022 third quarter was led by Europe, the Middle East & Africa, which benefited from ongoing increases in our travel retail business, partly relating to the increase in traffic as a result of the easing of travel restrictions, which varied by location. In addition, brick-and-mortar retail reopened across the region, driving growth in department stores and freestanding retail stores.

•Net sales rose in The Americas, primarily reflecting the recovery of brick-and-mortar stores, targeted expanded consumer reach and incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.

•Net sales decreased in Asia/Pacific, reflecting tighter COVID-19 restrictions in Greater China, partially offset by a progression towards recovery across other markets in the region.

As a result of the invasion of Ukraine, we suspended all our business investments and initiatives and commercial activity in Russia and Ukraine in early March 2022. This included the temporary closure of our owned and authorized freestanding stores and our own brand sites, as well as the suspension of shipments to our retailers in Russia and Ukraine.

42

THE ESTÉE LAUDER COMPANIES INC.

As the safety of our employees remains a top priority, we continue to take significant steps to support our employees in Ukraine, including the continuance of compensation, maintenance of regular communication and offering relocation assistance, and continue to provide compensation and support to our employees in Russia. We are monitoring the effects of this conflict, including risks that may affect our business, and expect that we will adjust our plans accordingly as the situation progresses.

For the three and nine months ended March 31, 2022, the results of operations related to Russia and Ukraine were not material to our consolidated financial statements.

Outlook

The COVID-19 pandemic continues to disrupt business for us, retailers and other companies with which we do business. There have been, and are likely to continue to be, intermittent store closures and supply chain disruptions. We are mindful that these trends may continue to impact the pace of recovery. The continued curtailment in international travel is also affecting our travel retail business in most of the world, which had been historically one of our fastest growth areas. We expect to invest in areas to support the recovery, including advertising, online, research and development and supply chain, to drive growth in areas of opportunity and help nurture emerging trends in the rest of the business. In addition to impacting net sales and profitability, these and other challenges may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets (i.e. potentially resulting in impairments).

We believe that the best way to increase long-term stockholder value is to continue providing superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across geographic regions, product categories, brands, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths and make us more productive and profitable. We plan to build upon and leverage our history of outstanding creativity and innovation, high quality products and services, and engaging communications while investing for long-term sustainable growth.

We continue to monitor the effects of the global macroeconomic environment, including increasing inflationary pressures; supply chain disruptions; social and political issues; regulatory matters, including the imposition of tariffs; geopolitical tensions; and global security issues. For example, we continue to monitor the geopolitical tensions between the United States and China, which could have a material adverse effect on our business. We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences.

The invasion of Ukraine has negatively impacted our operations in both Russia and Ukraine. In fiscal 2021, our operations in Ukraine and Russia accounted for approximately 1% of consolidated net sales. In March 2022, we announced a suspension of all our business investments and initiatives and commercial activity in Russia. Future impacts on our business, including sanctions and counter-sanctions, are difficult to predict due to the high level of uncertainty as to how these developments will evolve. On a broader perspective, there could be additional negative impacts to our net sales, earnings, assets and cash flows should these matters continue or escalate; such impacts could include economic challenges in other countries because of inflationary pressures or other consequences. Please refer to Risk Factors in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021, for a more complete discussion of the risks we encounter in our business and industry.

The uncertainty around the timing, speed and duration of the recovery from the adverse impacts of the COVID-19 pandemic, including the impacts on our business of the ongoing restrictions in China, will continue to affect our ability to grow sales profitably. We believe we can, to some extent, offset the impact of more ordinary challenges by continually developing and pursuing a diversified strategy with multiple engines of growth and by accelerating initiatives focused on areas of strength, discipline and agility, and by executing upon our Post-COVID Business Acceleration Program. As the current situation continues to progress, if economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, there could be a further negative effect on consumer confidence, demand, spending and willingness or ability to travel and, as a result, on our business. We are continuing to monitor these and other risks that may affect our business.

Post-COVID Business Acceleration Program

Information about our restructuring initiative, the Post-COVID Business Acceleration Program, is described in Notes to Consolidated Financial Statements, Note 4 – Charges Associated with Restructuring and Other Activities herein, as well as, in Notes to Consolidated Financial Statements, Note 8 – Charges Associated with Restructuring and Other Activities and in the Overview on page 33 of our Annual Report on Form 10-K for the year ended June 30, 2021.

43

THE ESTÉE LAUDER COMPANIES INC.

Goodwill and Other Intangible Asset Impairments

During the fiscal 2022 third quarter, given the lower-than-expected results from international expansion to areas that continue to be impacted by COVID-19, we made revisions to the internal forecasts relating to our GLAMGLOW reporting unit. We concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. As of March 31, 2022, the remaining carrying value of the trademark intangible asset was not recoverable and we recorded an impairment charge of $11 million reducing the carrying value to zero.

During the fiscal 2022 third quarter, given the lower-than-expected growth within key geographic regions and channels for Dr.Jart+ that continue to be impacted by the spread of COVID-19 variants and resurgence in cases and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, the lower than expected growth in key retail channels for DECIEM, and the lower than expected results from international expansion to areas that continue to be impacted by COVID-19 for Too Faced, we made revisions to the internal forecasts relating to its Dr. Jart+, DECIEM and Too Faced reporting units.

We concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022. We concluded that the carrying amounts of the long-lived assets were recoverable. For the Dr.Jart+ reporting unit, we also concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge. For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, we did not record impairment charges. As of March 31, 2022, the estimated fair values of Too Faced’s and DECIEM's trademarks exceeded their carrying values by 13% and 3%, respectively. For the Too Faced and DECIEM trademark intangible assets, if all other assumptions are held constant, an increase of 100 basis points and 50 basis points, respectively, in the weighted average cost of capital would result in an impairment charge. After adjusting the carrying values of the trademarks, we completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, we concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair value of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair value of the Dr. Jart+ trademark intangible asset was the weighted-average cost of capital, which was 10.5%.

A summary of the impairment charges for the three and nine months ended March 31, 2022 and the remaining trademark and goodwill carrying values as of March 31, 2022, for each reporting unit, are as follows:

(In millions)		Impairment Charge				Carrying Value
Reporting Unit:	Geographic Region	Trademarks		Goodwill		Trademarks		Goodwill
GLAMGLOW	The Americas	$	11	$	—	$	—	$	—
Dr. Jart+	Asia/Pacific	205		—		486		332
Total		$	216	$	—	$	486	$	332

44

THE ESTÉE LAUDER COMPANIES INC.

The impairment charges for the three and nine months ended March 31, 2022 were reflected in the skin care product category.

The fair value of the Dr. Jart+ trademark was equal to its carrying value subsequent to the impairment charge taken as of March 31, 2022. The key assumptions used to determine the estimated fair value of the reporting unit are primarily predicated on the estimated future impacts of COVID-19, the success of future new product launches, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts. If such plans do not materialize, or if there are further challenges in the business environments in which the reporting unit operates, resulting changes in the key assumptions could have negative impacts on the estimated fair value of the reporting unit and it is possible we could recognize additional impairment charges in the future.

NET SALES

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	4,245		$	3,864	$	14,176		$	12,279
$ Change from prior-year period	381					1,897
% Change from prior-year period	10		%			15		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	11		%			15		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales increased for the three and nine months ended March 31, 2022, driven by higher net sales from every major product category and in Europe, the Middle East & Africa and The Americas primarily reflecting (i) the continued progression towards brick-and-mortar and travel recovery compared to the prior-year challenges, which included widespread store closures, lower retail traffic, travel restrictions and quarantines, stemming from the COVID-19 pandemic; (ii) the continued success of hero product franchises; (iii) successful performance for holiday and key shopping moments (iv) new product launches; and (v) targeted expanded consumer reach.

Reported net sales in Asia/Pacific decreased and increased for the three and nine months ended March 31, 2022, respectively. For the three months ended March 31, 2022, net sales decreased due to a resurgence of COVID-19 cases across many Chinese provinces which led to restrictions to further prevent the spread of the virus. For the nine months ended March 31, 2022, net sales increased, led by mainland China and Korea.

For the three and nine months ended March 31, 2022, reported net sales increased from every major product category. Skin care net sales increased in both periods, led by La Mer and benefited from incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter. Fragrance net sales grew double-digits, led by Jo Malone London, Tom Ford Beauty and Le Labo. The net sales increases from Estée Lauder and M·A·C drove the increases in the makeup net sales. Hair care net sales increased in both periods, due to higher net sales from Aveda and Bumble and bumble.

For the three and nine months ended March 31, 2022, reported net sales grew double-digits in Europe, the Middle East & Africa and The Americas and benefited from incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter. Net sales increased in Europe, the Middle East & Africa, reflecting recovery across the region, led by our travel retail business and the United Kingdom. The increases in net sales in The Americas reflected higher net sales throughout the region.

The total net sales increases were impacted by approximately $53 million of unfavorable and $31 million of favorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

45

THE ESTÉE LAUDER COMPANIES INC.

Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures. Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impact of returns associated with restructuring and other activities for the three and nine months ended March 31, 2022 of $1 million and $3 million, respectively.

Product Categories

Skin Care

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	2,395		$	2,259	$	8,003		$	7,113
$ Change from prior-year period	136					890
% Change from prior-year period	6		%			13		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	7		%			12		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported skin care net sales increased for the three months ended March 31, 2022, reflecting higher net sales from La Mer and incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of approximately $269 million, combined. Net sales from La Mer increased, led by our travel retail business and mainland China, primarily reflecting continued success of hero products, such as Crème de la Mer and the Genaissance de la Mer line of products, the current-year launch of The Hydrating Infused Emulsion, the fiscal 2022 third-quarter launch of the new upgraded The Treatment Lotion and targeted expanded consumer reach.

Partially offsetting the increase in skin care net sales for the three months ended March 31, 2022, were lower net sales from Estée Lauder and Origins of approximately $157 million, combined. The decreases in net sales from Estée Lauder and Origins reflected lower traffic in Asia due to the resurgence of COVID-19 cases in many Chinese provinces, which led to restrictions to prevent further spread of the virus. Net sales from Estée Lauder also declined due to lower net sales from the Advanced Night Repair product franchise primarily due to the prior-period launch of Advanced Night Repair Synchronized Multi-Recovery Complex.

Reported skin care net sales increased for the nine months ended March 31, 2022, reflecting higher net sales from La Mer and Clinique, as well as incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of approximately $869 million, combined. Net sales from La Mer increased, as discussed above. Clinique net sales increased, primarily driven by our travel retail business and North America, reflecting the continued success of existing products, such as the Take The Day Off line of products and Even Better Clinical Radical Dark Spot Corrector + Interrupter.

Partially offsetting the increase in skin care net sales for the nine months ended March 31, 2022, were lower net sales from Estée Lauder and Origins of approximately $197 million, combined, as discussed above.

The skin care net sales increases were impacted by approximately $16 million of unfavorable and $57 million of favorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

46

THE ESTÉE LAUDER COMPANIES INC.

Makeup

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	1,114		$	1,018	$	3,674		$	3,243
$ Change from prior-year period	96					431
% Change from prior-year period	9		%			13		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	11		%			14		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup net sales increased for the three months ended March 31, 2022, led by higher net sales from M·A·C, Estée Lauder and Clinique, of approximately $109 million, combined. The continued progression towards recovery in makeup, including increased usage occasions compared to the prior-year period, led to the increase in makeup net sales in The Americas and Europe, the Middle East & Africa. The increase in net sales from M·A·C was primarily driven by the continued success of hero products, such as Studio Fix, the fiscal 2022 third quarter launch of MACStack mascara and successful social media campaigns during key shopping moments. Net sales from Estée Lauder increased, primarily due to the continued success of existing products, such as the Double Wear and Futurist product franchises and new product launches, such as the current-year launches of Double Wear Sheer Long-Wear Makeup. Net sales for Clinique increased, primarily reflecting continued success from Even Better Makeup and successful performance in the lip, concealer and eye subcategories.

Reported makeup net sales increased for the nine months ended March 31, 2022, led by higher net sales from Estée Lauder and M·A·C of approximately $303 million, combined, as noted above. The net sales increase from M·A·C also benefited from the continued success of existing products, such as Ruby's Crew and Re-Think Pink in the lip subcategory and Magic Extension in the mascara subcategory, as well as the success of the fiscal 2022 third quarter launch of MACStack mascara.

The makeup net sales increases were impacted by approximately $19 million and $14 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

Fragrance

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	579		$	454	$	1,987		$	1,478
$ Change from prior-year period	125					509
% Change from prior-year period	28		%			34		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	31		%			35		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

47

THE ESTÉE LAUDER COMPANIES INC.

Reported fragrance net sales increased for the three months ended March 31, 2022, primarily driven by Jo Malone London, Tom Ford Beauty, Le Labo and Estée Lauder of approximately $107 million, combined. Fragrance net sales grew in every geographic region, reflecting continued growth in luxury fragrances, the brick-and-mortar and travel recovery in various parts of the world due to more store openings, increased retail traffic, successful performance during holiday and key shopping moments, and the easing of travel restrictions compared to the prior-year period. The increase in net sales from Jo Malone London reflected the fiscal 2022 third quarter launches of House of Roses and Mediterranean Blossoms and continued growth of the home and bath & body subcategories. Net sales increased from Tom Ford Beauty, also benefiting from the continued success of Private Blend and Signature fragrances and the fiscal 2022 third quarter product launches of Costa Azzurra parfum, Rose de Chine and Rose d'Amalfi. Net sales from Le Labo increased, also reflecting the continued success of hero product franchises, current-year product launches and targeted expanded consumer reach. The increase in net sales from Estée Lauder was primarily due to the continued success of the Beautiful Magnolia line of products.

Reported fragrance net sales increased for the nine months ended March 31, 2022, primarily driven by Jo Malone London, Tom Ford Beauty and Le Labo of approximately $378 million, combined, and grew double digits in every geographic region, as discussed above. The increases in net sales from Jo Malone London reflected the continued success of our hero products, current-year launches and continued growth of the home and bath & body subcategories. Net sales increased from Tom Ford Beauty, reflecting the continued success of Private Blend and Signature fragrances, current-year product launches and the diversification of product offerings by region. Net sales from Le Labo increased, as discussed above.

The fragrance net sales increases were impacted by approximately $14 million and $8 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

Hair Care

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	147		$	128	$	475		$	418
$ Change from prior-year period	19					57
% Change from prior-year period	15		%			14		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	17		%			14		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported hair care net sales increased for the three and nine months ended March 31, 2022, reflecting higher net sales from Aveda and Bumble and bumble, combined, of approximately $18 million and $49 million, respectively, primarily due to the continued progression towards salon and retail store recovery in North America. Net sales from Aveda increased in both periods, reflecting the continued success of existing product franchises and the fiscal 2022 third quarter relaunch of Full Spectrum Semi-Permanent Treatment Hair Color. The increases in net sales from Bumble and bumble also reflected the success of hero products, the fiscal 2022 third quarter product launches of Bb. Thickening Plumping Mask and Bb. Thickening Go Big Plumping Treatment, and targeted expanded consumer reach.

Geographic Regions

We strategically time our new product launches by geographic market, which may account for differences in regional sales growth.

48

THE ESTÉE LAUDER COMPANIES INC.

The Americas

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	1,053		$	916	$	3,547		$	2,837
$ Change from prior-year period	137					710
% Change from prior-year period	15		%			25		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	14		%			25		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales in The Americas increased for the three and nine months ended March 31, 2022 in every country and product category, reflecting the brick-and-mortar and makeup recovery from the prior-year challenges that included store closures, lower retail traffic, fewer makeup usage occasions and quarantines, stemming from the COVID-19 pandemic. The net sales increases were led by higher net sales in North America of approximately $125 million and $658 million, respectively, also benefiting from incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, higher net sales from many of our brands, led by M·A·C and Clinique, and targeted expanded consumer reach.

Net sales in The Americas were impacted by approximately $6 million and $13 million of favorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

Europe, the Middle East & Africa

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	1,990		$	1,706	$	6,201		$	5,276
$ Change from prior-year period	284					925
% Change from prior-year period	17		%			18		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	19		%			18		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales for the three and nine months ended March 31, 2022 increased in Europe, the Middle East & Africa, reflecting continued recovery across the region, primarily due to store openings, increased retail traffic, and the easing of travel restrictions compared to the prior year, led by our travel retail business and the United Kingdom, combined, of approximately $271 million and $712 million, respectively. Despite the fiscal 2022 third quarter resurgence in COVID-19 cases in many Chinese provinces, which led to restrictions to prevent further spread of the virus and the curtailment of travel, net sales increased in our travel retail business, reflecting continued strength of our brands with the Chinese consumer, the easing of travel restrictions in Europe, the Middle East & Africa and The Americas, and continued success of hero product franchises from La Mer and Jo Malone London. These benefits were partially offset by lower net sales from Estée Lauder products, primarily reflecting lower net sales from the Advanced Night Repair product franchise primarily due to the prior-period launch of Advanced Night Repair Synchronized Multi-Recovery Complex. Net sales in the United Kingdom increased, primarily reflecting brick-and-mortar recovery, as noted above, and benefiting from the growth in makeup and fragrance. The increases in net sales in the United Kingdom also reflected incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.

49

THE ESTÉE LAUDER COMPANIES INC.

Net sales in Europe, the Middle East & Africa were impacted by approximately $47 million and $45 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

Asia/Pacific

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Net sales	$	1,203		$	1,252	$	4,431		$	4,176
$ Change from prior-year period	(49)					255
% Change from prior-year period	(4)		%			6		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	(3)		%			5		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales decreased in Asia/Pacific for the three months ended March 31, 2022, primarily driven by lower results in mainland China and Hong Kong of approximately $54 million, combined, due to the resurgence of COVID-19 cases toward the end of the fiscal 2022 third quarter that led to restrictions to prevent further spread of the virus. These restrictions resulted in limited capacity in our Shanghai distribution facilities and the temporary curtailment of retail traffic, travel and other distribution capabilities.

Reported net sales increased in Asia/Pacific for the nine months ended March 31, 2022, reflecting higher net sales in mainland China, despite the resurgence in COVID-19 cases in many Chinese provinces toward the end of the fiscal 2022 third quarter, and Korea of approximately $257 million, combined. Net sales in mainland China increased, primarily due to the continued success of hero products franchises from Estée Lauder, La Mer and Jo Malone London, reflecting continued growth in skin care and strong momentum in fragrance, successful performance during holiday and key shopping moments, new product launches, and the current-year launch on a new third-party online platform. Net sales increased in Korea, despite the challenging brick-and-mortar retail environment, primarily reflecting the continued success of hero product franchises from Jo Malone London and strong momentum in fragrance.

Net sales in Asia/Pacific were impacted by approximately $11 million of unfavorable and $64 million of favorable foreign currency translation for the three and nine months ended March 31, 2022, respectively.

GROSS MARGIN

Gross margin increased to 76.6% and 76.9% for the three and nine months ended March 31, 2022, respectively, as compared with 75.7% and 76.8% in the prior-year periods.

	Favorable (Unfavorable) Basis Points
	March 31, 2022
	Three Months Ended	Nine Months Ended
Mix of business	(30)	(35)
Obsolescence charges	65	(5)
Manufacturing costs and other	(25)	(10)
Foreign exchange transactions	60	50
Subtotal	70	—
Charges associated with restructuring and other activities	20	10
Total	90	10

50

THE ESTÉE LAUDER COMPANIES INC.

The increase in gross margin for the three months ended March 31, 2022 reflected favorable obsolescence charges due to a higher level of destruction in the prior-year period, the favorable impact from transactional foreign exchange due to the strengthening of the U.S. Dollar and the favorable impact from under-absorption of manufacturing overhead costs in the prior-year period, partially offset by higher inbound transportation costs driven by global supply chain disruptions as discussed above and an unfavorable impact from our mix of business. The unfavorable impact from our mix of business was primarily driven by the change in category mix, primarily due to the increase in makeup and fragrance net sales, and higher costs from new skin care products, partially offset by strategic price increases.

The increase in gross margin for the nine months ended March 31, 2022 reflected a favorable transactional foreign exchange impact due to the strengthening of the U.S. Dollar, partially offset by an unfavorable impact from our mix of business. The unfavorable impact from our mix of business was primarily due to lower gross margins on DECIEM products, change in category mix primarily due to the increase in makeup and fragrance net sales and higher costs from new products and product sets, partially offset by strategic price increases.

OPERATING EXPENSES

Operating expenses as a percentage of net sales was 59.2% and 55.1% for the three and nine months ended March 31, 2022, respectively, as compared with 59.8% and 57.4% in the prior-year periods.

	Favorable (Unfavorable) Basis Points
	March 31, 2022
	Three Months Ended	Nine Months Ended
General and administrative expenses	90	70
Advertising, merchandising, sampling and product development	10	30
Selling	20	70
Stock-based compensation	—	10
Store operating costs	10	10
Shipping	(80)	(50)
Foreign exchange transactions	(10)	(10)
Subtotal	40	130
Charges associated with restructuring and other activities	290	110
Goodwill, other intangible and long-lived asset impairments	(420)	(60)
Acquisition-related stock compensation income	150	50
Total	60	230

The favorable change in operating expense margin for the three months ended March 31, 2022, was driven by income related to the change in fair value of acquisition-related stock options of $60 million relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter, disciplined general and administrative expense management and the increase in net sales. Partially offsetting these favorable changes were the year-over-year impact of other intangible and long-lived asset impairments of $183 million, as well as higher shipping costs due to the increase in net sales volume and increased shipping rates.

The favorable change in operating expense margin for the nine months ended March 31, 2022, was driven by the increase in net sales, disciplined general and administrative expense management, the favorable impact from selling expenses, primarily due to the shift in channel mix to online, travel retail and specialty-multi, and income related to the change in fair value of acquisition-related stock options of $58 million relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter. Partially offsetting these favorable changes in operating expense margin were the year-over-year impact of goodwill, other intangible and long-lived asset impairments of $102 million and higher shipping costs as discussed above.

51

THE ESTÉE LAUDER COMPANIES INC.

OPERATING RESULTS

	Three Months Ended March 31						Nine Months Ended March 31
($ in millions)	2022			2021			2022			2021
As Reported:
Operating income	$	738		$	616		$	3,091		$	2,384
$ Change from prior-year period	122						707
% Change from prior-year period	20		%				30		%
Operating margin	17.4		%	15.9		%	21.8		%	19.4		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, goodwill, other intangible and long-lived asset impairments, the change in fair value of acquisition-related stock options and changes in fair value of contingent consideration	15		%				23		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

The increase in reported operating margin for the three and nine months ended March 31, 2022 from the prior-year period was primarily driven by the favorable changes in operating expense margin and gross margin, discussed above, partially offset by the year-over-year impact of goodwill, other intangible and long-lived asset impairments of $183 million and $102 million, respectively.

Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities.

Product Categories

Skin Care

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Operating income	$	667		$	804	$	2,466		$	2,453
$ Change from prior-year period	(137)					13
% Change from prior-year period	(17)		%			1		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of goodwill, other intangible and long-lived asset impairments and the change in fair value of acquisition-related stock options	3		%			4		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

52

THE ESTÉE LAUDER COMPANIES INC.

Reported skin care operating income decreased for the three months ended March 31, 2022, reflecting the current year impact of other intangible asset impairments related to Dr.Jart+ and GLAMGLOW of approximately $216 million, combined, as well as lower results from Estée Lauder. The decrease in operating income from Estée Lauder was primarily due to the decrease in net sales.

Partially offsetting the decreases in operating income for the three months ended March 31, 2022 were higher results from La Mer primarily due to the increase in net sales, as well as $58 million of income related to the change in fair value of acquisition-related stock options relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter.

Reported skin care operating income increased for the nine months ended March 31, 2022, reflecting higher results from La Mer, Bobbi Brown and Clinique of approximately $355 million, combined, and $56 million of income related to the change in fair value of acquisition-related stock options relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter. The higher results for La Mer reflected the increase in net sales, partially offset by the increase in cost of sales primarily due to higher costs for promotional items and higher advertising and promotional activities primarily to support holiday and key shopping moments and new product launches. Operating income from Clinique increased, primarily due to higher net sales, partially offset by higher advertising and promotional activities primarily to support holiday and key shopping moments and new product launches.

Partially offsetting the increases in operating income for the nine months ended March 31, 2022 were the unfavorable year-over-year impact of goodwill and other intangible asset impairments related to Dr.Jart+ and GLAMGLOW of approximately $135 million, combined, as well as lower results from Estée Lauder. The decrease in operating income from Estée Lauder was primarily due to the decrease in net sales, the increase in cost of sales primarily due to higher costs for promotional items and higher advertising and promotional activities to support hero products, holiday and key shopping moments and new product launches.

Makeup

	Three Months Ended March 31				Nine Months Ended March 31
($ in millions)	2022		2021		2022		2021
As Reported:
Operating income (loss)	$	7	$	(72)	$	228	$	(115)
$ Change from prior-year period	79				343
% Change from prior-year period	100+%				100+%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of long-lived asset impairments	100+%				100+

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup operating income increased for the three months ended March 31, 2022, reflecting higher results from M·A·C, Clinique, Estée Lauder and La Mer of approximately $69 million, combined, and the favorable year-over-year impact of long-lived asset impairments of $24 million. Operating income from M·A·C increased due to the increase in net sales, partially offset by higher advertising and promotional activities to support new product launches and higher selling costs due to the brick-and-mortar recovery, including more stores being open and increased retail traffic compared to the prior year. The higher results from Clinique were primarily due to the increases in net sales, partially offset by higher selling costs due to the brick-and-mortar recovery and higher shipping costs. Operating income for Estée Lauder increased primarily due to the increase in net sales, partially offset by higher advertising and promotional activities relating to strategic investments to support the makeup recovery and digital advertising and social media spending. Operating income from La Mer increased primarily due to an increase in net sales, partially offset by higher cost of sales, due, in part to an increase in promotional items.

53

THE ESTÉE LAUDER COMPANIES INC.

Reported makeup operating income increased for the nine months ended March 31, 2022, primarily driven by higher results from Estée Lauder and M·A·C of approximately $179 million, combined, reflecting the increases in net sales, partially offset by higher advertising and promotional activities as discussed above.

Fragrance

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Operating income	$	105		$	47	$	446		$	248
$ Change from prior-year period	58					198
% Change from prior-year period	100+%					80		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for long-lived asset impairments and changes in fair value of contingent consideration	88		%			75		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported fragrance operating income increased for the three and nine months ended March 31, 2022, primarily driven by higher results from Jo Malone London, Tom Ford Beauty and Le Labo, combined, of approximately $46 million and $171 million, respectively, as well as the favorable year-over-year impact of long-lived asset impairments of $9 million. In both periods, the higher results from Jo Malone London primarily reflected the increase in net sales, partially offset by higher cost of sales given the growth of the home subcategory and the increase in promotional items and the increase in selling costs resulting from the brick-and-mortar recovery. Also partially offsetting the increase in net sales from Jo Malone London for the nine months ended March 31, 2022, were higher advertising and promotional activities primarily to support in-store promotions given the increase in brick-and-mortar traffic and new product launches. Operating results from Tom Ford Beauty increased in both periods, primarily due to higher net sales, partially offset by higher cost of sales due, in part, to the increase in promotional items and the increase in advertising and promotional activities to support strategic investments in digital advertising and social media spending (including costs associated with influencers), hero product franchises, and new product launches. The increases in operating income from Le Labo, in both periods, was primarily driven by the increase in net sales.

Hair Care

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Operating loss	$	(18)		$	(17)	$	(8)		$	(10)
$ Change from prior-year period	(1)					2
% Change from prior-year period	(6)		%			20		%

Reported hair care operating income decreased for the three months ended March 31, 2022, primarily driven by increased operating expenses to support the salon and retail story recovery, partially offset by increases in operating results from Bumble and bumble and Aveda, primarily due to the increases in net sales.

Reported hair care operating income increased for the nine months ended March 31, 2022, primarily driven by higher results from Bumble and bumble, primarily due to the increase in net sales.

54

THE ESTÉE LAUDER COMPANIES INC.

Geographic Regions

The Americas

	Three Months Ended March 31				Nine Months Ended March 31
($ in millions)	2022		2021		2022		2021
As Reported:
Operating income	$	408	$	155	$	1,044	$	256
$ Change from prior-year period	253				788
% Change from prior-year period	100+%				100+%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of goodwill and other intangible asset impairments and the change in fair value of acquisition-related stock options	100+%				100+%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating results increased in The Americas for the three months ended March 31, 2022, primarily reflecting higher operating results from North America of approximately $251 million, primarily due to the increase in net sales, higher intercompany royalty income primarily from growth in our travel retail business and $60 million of income related to the change in fair value of acquisition-related stock options relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter, partially offset by an unfavorable year-over-year impact of other intangible asset impairments relating to GLAMGLOW of $11 million.

Reported operating results increased in The Americas for the nine months ended March 31, 2022, primarily reflecting higher operating results from North America of approximately $776 million, primarily due to the increase in net sales, higher intercompany royalty income primarily from growth in our travel retail business, favorable year-over-year impact of goodwill and other intangible asset impairments relating to GLAMGLOW of $70 million and $58 million of acquisition-related stock option income relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter. Partially offsetting these increases in operating income were higher advertising and promotional activities, primarily to support strategic investments in digital advertising and social media spending and in-store promotions given the increase in brick-and-mortar traffic, and increases in selling expense due to the brick-and-mortar and makeup recovery compared to the prior-year.

Europe, the Middle East & Africa

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Operating income	$	281		$	361	$	1,366		$	1,429
$ Change from prior-year period	(80)					(63)
% Change from prior-year period	(22)		%			(4)		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for long-lived asset impairments and changes in contingent consideration	(29)		%			(6)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

55

THE ESTÉE LAUDER COMPANIES INC.

Reported operating income decreased in Europe, the Middle East & Africa for the three and nine months ended March 31, 2022, primarily driven by lower results from our travel retail business and the United Kingdom, combined, of approximately $121 million and $162 million, respectively. In both periods, operating income decreased in our travel retail business reflecting the (i) increase in intercompany royalty expense to The Americas primarily due to the growth of our travel retail business and (ii) higher shipping costs due to the increase in net sales volume and shipping rates. Also contributing to the decrease in operating income from our travel retail business was higher advertising and promotional activity primarily to support strategic investments in key areas of growth (primarily hero products and the skin care product category), as well as to capture the current-year increase in airport traffic. These higher expenses were partially offset by the increase in net sales. Operating income decreased in the United Kingdom in both periods, led by higher selling and store operations costs as more brick-and-mortar locations were open compared to the prior-year, partially offset by an increase in net sales.

Partially offsetting these decreases in operating income for the three and nine months ended March 31, 2022 were higher results from several affiliates across the region, reflecting the brick-and-mortar recovery, compared to the prior-year periods.

Asia/Pacific

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions)	2022			2021		2022			2021
As Reported:
Operating income	$	72		$	245	$	725		$	890
$ Change from prior-year period	(173)					(165)
% Change from prior-year period	(71)		%			(19)		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for other intangible asset impairments	13		%			4		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating income decreased in Asia/Pacific for the three and nine months ended December 31. 2021, reflecting the current year other intangible asset impairment relating to Dr. Jart+ of $205 million, partially offset by increases in operating results from other affiliates across the region due to the progression towards recovery.

INTEREST AND INVESTMENT INCOME

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Interest expense	$	41	$	43	$	125	$	131
Interest income and investment income, net	$	5	$	9	$	19	$	40

Interest income and investment income, net decreased primarily due to equity method investment income recognized in the prior-year period relating to our previously held equity method investment in DECIEM.

56

THE ESTÉE LAUDER COMPANIES INC.

PROVISION FOR INCOME TAXES

The provision for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of share-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.

	Three Months Ended March 31				Nine Months Ended March 31
	2022		2021		2022		2021
Effective rate for income taxes	18.5	%	21.0	%	21.1	%	18.5	%
Basis-point change from the prior-year period	(250)				260

The effective tax rate for the three and nine months ended March 31, 2021 included the retroactive impact relating to fiscal 2020 and 2019 of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. The impact of the final issuance of GILTI tax regulations with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second and third quarters of fiscal 2021 and resulted in reductions of 30 basis points and 220 basis points to the effective tax rates for the three and nine months ended March 31, 2021, respectively.

For the three months ended March 31, 2022, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations, partially offset by a decrease in excess tax benefits associated with stock-based compensation arrangements.

For the nine months ended March 31, 2022, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company’s foreign operations, which includes the retroactive impact of the final GILTI tax regulations recognized in the prior period. Also contributing to the increase was a decrease in excess tax benefits associated with stock-based compensation arrangements.

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

	Three Months Ended March 31					Nine Months Ended March 31
($ in millions, except per share data)	2022			2021		2022			2021
As Reported:
Net earnings attributable to The Estée Lauder Companies Inc.	$	558		$	456	$	2,338		$	1,852
$ Change from prior-year period	102					486
% Change from prior-year period	22		%			26		%
Diluted net earnings per common share	$	1.53		$	1.24	$	6.39		$	5.03
% Change from prior-year period	24		%			27		%
Non-GAAP Financial Measure(1):
% Change in diluted net earnings per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, goodwill, other intangible and long-lived asset impairments, the change in fair value of acquisition-related stock options and changes in fair value of contingent consideration	17		%			20		%

(1)See “Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

57

THE ESTÉE LAUDER COMPANIES INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; goodwill, other intangible and long-lived asset impairments; the changes in fair value of contingent consideration; the change in fair value of acquisition-related stock options; and the effects of foreign currency translation.

The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

($ in millions, except per share data)	Three Months Ended March 31				Variance		% Change		% Change in  constant currency
	2022		2021
Net sales, as reported	$	4,245	$	3,864	$	381	10	%	11	%
Returns associated with restructuring and other activities	1		10		(9)
Net sales, as adjusted	$	4,246	$	3,874	$	372	10	%	11	%
Operating income, as reported	$	738	$	616	$	122	20	%	18	%
Charges associated with restructuring and other activities	23		145		(122)
Other intangible and long-lived asset impairments	216		33		183
Change in fair value of acquisition-related stock options	(60)		—		(60)
Operating income, as adjusted	$	917	$	794	$	123	15	%	16	%
Diluted net earnings per common share, as reported	$	1.53	$	1.24	$	.29	24	%	22	%
Charges associated with restructuring and other activities	.05		.31		(.26)
Other intangible and long-lived asset impairments	.45		.07		.38
Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest)	(.13)		—		(.13)
Diluted net earnings per common share, as adjusted	$	1.90	$	1.62	$	.28	17	%	18	%

58

THE ESTÉE LAUDER COMPANIES INC.

($ in millions, except per share data)	Nine Months Ended March 31				Variance		% Change		% Change in  constant currency
	2022		2021
Net sales, as reported	$	14,176	$	12,279	$	1,897	15	%	15	%
Returns associated with restructuring and other activities	3		10		(7)
Net sales, as adjusted	$	14,179	$	12,289	$	1,890	15	%	15	%
Operating income, as reported	$	3,091	$	2,384	$	707	30	%	28	%
Charges associated with restructuring and other activities	44		191		(147)
Goodwill, other intangible and long-lived asset impairments	216		114		102
Changes in fair value of contingent consideration	—		(2)		2
Change in fair value of acquisition-related stock options	(58)		—		(58)
Operating income, as adjusted	$	3,293	$	2,687	$	606	23	%	22	%
Diluted net earnings per common share, as reported	$	6.39	$	5.03	$	1.36	27	%	25	%
Charges associated with restructuring and other activities	.09		.41		(.32)
Goodwill, other intangible and long-lived asset impairments	.45		.25		.20
Changes in fair value of contingent consideration	—		(.01)		.01
Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest)	(.13)		—		(.13)
Diluted net earnings per common share, as adjusted	$	6.80	$	5.68	$	1.12	20	%	19	%

As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.

59

THE ESTÉE LAUDER COMPANIES INC.

The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:

	As Reported						Impact of foreign currency translation		Variance, in constant currency		% Change, as reported		% Change, in constant currency
	Three Months Ended March 31
($ in millions)	2022		2021		Variance
By Product Category:
Skin Care	$	2,395	$	2,259	$	136	$	16	$	152	6	%	7	%
Makeup	1,114		1,018		96		19		115		9		11
Fragrance	579		454		125		14		139		28		31
Hair Care	147		128		19		3		22		15		17
Other	11		15		(4)		—		(4)		(27)		(27)
	4,246		3,874		372		52		424		10		11
Returns associated with restructuring and other activities	(1)		(10)		9		(1)		8
Total	$	4,245	$	3,864	$	381	$	51	$	432	10	%	11	%
By Region:
The Americas	$	1,053	$	916	$	137	$	(6)	$	131	15	%	14	%
Europe, the Middle East & Africa	1,990		1,706		284		47		331		17		19
Asia/Pacific	1,203		1,252		(49)		11		(38)		(4)		(3)
	4,246		3,874		372		52		424		10		11
Returns associated with restructuring and other activities	(1)		(10)		9		(1)		8
Total	$	4,245	$	3,864	$	381	$	51	$	432	10	%	11	%

60

THE ESTÉE LAUDER COMPANIES INC.

	As Reported						Impact of foreign currency translation		Variance, in constant currency		% Change, as reported		% Change, in constant currency
	Nine Months Ended March 31
($ in millions)	2022		2021		Variance
By Product Category:
Skin Care	$	8,003	$	7,113	$	890	$	(57)	$	833	13	%	12	%
Makeup	3,674		3,243		431		14		445		13		14
Fragrance	1,987		1,478		509		8		517		34		35
Hair Care	475		418		57		3		60		14		14
Other	40		37		3		—		3		8		8
	14,179		12,289		1,890		(32)		1,858		15		15
Returns associated with restructuring and other activities	(3)		(10)		7		(1)		6
Total	$	14,176	$	12,279	$	1,897	$	(33)	$	1,864	15	%	15	%
By Region:
The Americas	$	3,547	$	2,837	$	710	$	(13)	$	697	25	%	25	%
Europe, the Middle East & Africa	6,201		5,276		925		45		970		18		18
Asia/Pacific	4,431		4,176		255		(64)		191		6		5
	14,179		12,289		1,890		(32)		1,858		15		15
Returns associated with restructuring and other activities	(3)		(10)		7		(1)		6
Total	$	14,176	$	12,279	$	1,897	$	(33)	$	1,864	15	%	15	%

61

THE ESTÉE LAUDER COMPANIES INC.

The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of goodwill, other intangible and long-lived asset impairments and changes in fair value of contingent consideration:

	As Reported						Add: Changes in Other intangible and long-lived asset impairments		Add: Changes in fair value of contingent consideration		Add: Change in fair value of acquisition-related stock options		Variance, as adjusted		% Change, as reported		% Change, as adjusted
	Three Months Ended March 31
($ in millions)	2022		2021		Variance
By Product Category:
Skin Care	$	667	$	804	$	(137)	$	216	$	—	$	(58)	$	21	(17)	%	3	%
Makeup	7		(72)		79		(24)		—		(2)		53		100+		100+
Fragrance	105		47		58		(9)		—		—		49		100+		88
Hair Care	(18)		(17)		(1)		—		—		—		(1)		(6)		(6)
Other	—		(1)		1		—		—		—		1		100+		100
	761		761		—		$	183	$	—	$	(60)	$	123	—	%	15	%
Charges associated with restructuring and other activities	(23)		(145)		122
Total	$	738	$	616	$	122
By Region:
The Americas	$	408	$	155	$	253	$	11	—		$	(60)	$	204	100+%		100+%
Europe, the Middle East & Africa	281		361		(80)		(33)		—		—		(113)		(22)		(29)
Asia/Pacific	72		245		(173)		205		—		—		32		(71)		13
	761		761		—		$	183	$	—	$	(60)	$	123	—	%	15	%
Charges associated with restructuring and other activities	(23)		(145)		122
Total	$	738	$	616	$	122

62

THE ESTÉE LAUDER COMPANIES INC.

	As Reported						Add: Changes in Goodwill, other intangible and long-lived asset impairments		Add: Changes in fair value of contingent consideration		Add: Change in fair value of acquisition-related stock options		Variance, as adjusted		% Change, as reported		% Change, as adjusted
	Nine Months Ended March 31
($ in millions)	2022		2021		Variance
By Product Category:
Skin Care	$	2,466	$	2,453	$	13	$	135			$	(56)	$	92	1	%	4	%
Makeup	228		(115)		343		(24)		—		(2)		317		100+		100+
Fragrance	446		248		198		(9)		2		—		191		80		75
Hair Care	(8)		(10)		2		—		—		—		2		20		20
Other	3		(1)		4		—		—		—		4		100+		100+
	3,135		2,575		560		$	102	$	2	$	(58)	$	606	22	%	23	%
Charges associated with restructuring and other activities	(44)		(191)		147
Total	$	3,091	$	2,384	$	707
By Region:
The Americas	$	1,044	$	256	$	788	$	(70)	$	—	$	(58)	$	660	100+%		100+%
Europe, the Middle East & Africa	1,366		1,429		(63)		(33)		2		—		(94)		(4)		(6)
Asia/Pacific	725		890		(165)		205		—		—		40		(19)		4
	3,135		2,575		560		$	102	$	2	$	(58)	$	606	22	%	23	%
Charges associated with restructuring and other activities	(44)		(191)		147
Total	$	3,091	$	2,384	$	707

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At March 31, 2022, we had cash and cash equivalents of $3,836 million compared with $4,958 million at June 30, 2021. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.

Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis.

The Tax Cuts and Jobs Act (“TCJA”) resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. As a result, we changed our indefinite reinvestment assertion related to certain foreign earnings, and we continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings. We do not believe that continuing to reinvest our foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.

The effects of inflation have not been significant to our overall operating results in recent years, however we are mindful of increasing inflationary pressures. Generally, we have been able to introduce new products at higher prices, increase prices and implement other operating efficiencies to sufficiently offset cost increases.

63

THE ESTÉE LAUDER COMPANIES INC.

Credit Ratings

Changes in our credit ratings will likely result in changes in our borrowing costs. Our credit ratings also impact the cost of our revolving credit facility. Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing. A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating. As of April 26, 2022, our long-term debt is rated A+ with a stable outlook by Standard & Poor’s and A1 with a stable outlook by Moody’s.

Debt

At March 31, 2022, our outstanding borrowings were as follows:

($ in millions)	Long-term Debt		Current Debt		Total Debt
3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) (1), (13)	$	636	$	—	$	636
4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) (2), (13)	494		—		494
4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) (3), (13)	455		—		455
3.70% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) (4), (13)	247		—		247
6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) (5), (13)	294		—		294
5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) (6)	197		—		197
1.950% Senior Notes, due March 15, 2031 ("2031 Senior Notes") (7), (13)	574		—		574
2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") (8), (13)	643		—		643
2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) (9), (13)	642		—		642
3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) (10), (13)	498		—		498
2.00% Senior Notes, due December 1, 2024 (“2024 Senior Notes”) (11), (13)	497		—		497
2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) (12), (13)	—		251		251
Other long-term borrowings	11		—		11
Other current borrowings	—		18		18
	$	5,188	$	269	$	5,457

(1)Consists of $650 million principal, unamortized debt discount of $7 million and debt issuance costs of $7 million.

(2)Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $5 million.

(3)Consists of $450 million principal, net unamortized debt premium of $9 million and debt issuance costs of $4 million.

(4)Consists of $250 million principal, unamortized debt discount of $1 million and debt issuance costs of $2 million.

(5)Consists of $300 million principal, unamortized debt discount of $3 million and debt issuance costs of $3 million.

(6)Consists of $200 million principal, unamortized debt discount of $2 million and debt issuance costs of $1 million.

(7)Consists of $600 million, principal, unamortized debt discount of $4 million, debt issuance costs of $4 million and a $18 million loss to reflect the fair value of interest rate swaps.

(8)Consists of $700 million principal, unamortized debt discount of $1 million, debt issuance costs of $3 million and a $53 million loss to reflect the fair value of interest rate swaps.

(9)Consists of $650 million principal, unamortized debt discount of $5 million and debt issuance costs of $3 million.

(10)Consists of $500 million principal and debt issuance costs of $2 million.

(11)Consists of $500 million principal, unamortized debt discount of $2 million and debt issuance costs of $1 million.

(12)Consists of $250 million principal and a $1 million gain to reflect the fair value of interest rate swaps.

(13)The Senior Notes contain certain customary incurrence–based covenants, including limitations on indebtedness secured by liens.

Total debt as a percent of total capitalization (excluding noncontrolling interests) was 47% and 48% at March 31, 2022 and June 30, 2021, respectively.

64

THE ESTÉE LAUDER COMPANIES INC.

Cash Flows

	Nine Months Ended March 31
(In millions)	2022		2021
Net cash flows provided by operating activities	$	1,969	$	2,777
Net cash flows used for investing activities	$	(563)	$	(577)
Net cash flows used for financing activities	$	(2,516)	$	(862)

The change in net cash flows from operating activities primarily reflected higher working capital needs to support growth compared to the prior-year period and actions taken to mitigate global supply chain challenges, as well as higher cash paid for taxes. These changes were partially offset by higher earnings before taxes, excluding non-cash items.

The change in net cash flows used for investing activities primarily reflected an increase in capital expenditures, primarily driven by increased investments for a new manufacturing facility in Japan, online capabilities and information technology enhancements, as well as investments to support the reopening of our offices located around the world where COVID-19 cases subsided. Partially offsetting this increase is a favorable impact from the settlement of net investment hedges, which has a corresponding unfavorable impact that is reflected in the change in working capital noted above.

The change in net cash flows used for financing activities primarily reflected an increase relating to higher treasury stock repurchases and proceeds from the issuance of long-term debt, net in the prior-year period, partially offset by the repayment of short-term debt made in the prior-year period.

Dividends

For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the nine months ended March 31, 2022, see Notes to Consolidated Financial Statements, Note 12 – Equity and Redeemable Noncontrolling Interest.

Pension and Post-retirement Plan Funding

There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Commitments, Contractual Obligations and Contingencies

There have been no significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 9 – Contingencies.

Derivative Financial Instruments and Hedging Activities

For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments.

Foreign Exchange Risk Management

For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments (Cash Flow Hedges, Net Investment Hedges).

Credit Risk

For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments (Credit Risk).

65

THE ESTÉE LAUDER COMPANIES INC.

Market Risk

We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $258 million and $218 million as of March 31, 2022 and June 30, 2021, respectively. This potential change does not consider our underlying foreign currency exposures.

In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our aggregate liability portfolio, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $41 million and $83 million as of March 31, 2022 and June 30, 2021, respectively.

Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in our portfolio of derivative financial instruments during the year. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying transactions for which the derivative financial instrument was intended.

OFF-BALANCE SHEET ARRANGEMENTS

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

CRITICAL ACCOUNTING POLICIES

As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies relate to goodwill, other intangible assets and long-lived assets, income taxes and business combinations. Since June 30, 2021, there have been no significant changes to the assumptions and estimates related to our critical accounting policies.

RECENTLY ISSUED ACCOUNTING STANDARDS

For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company’s consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

We and our representatives from time to time make written or oral forward-looking statements, including in this and other filings with the Securities and Exchange Commission, in our press releases and in our reports to stockholders, which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like “expect,” “will,” “will likely result,” “would,” “believe,” “estimate,” “planned,” “plans,” “intends,” “may,” “should,” “could,” “anticipate,” “estimate,” “project,” “projected,” “forecast,” and “forecasted” or similar expressions. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation:

66

THE ESTÉE LAUDER COMPANIES INC.

(1)increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;

(2)our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business;

(3)consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables;

(4)destocking and tighter working capital management by retailers;

(5)the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs;

(6)shifts in the preferences of consumers as to where and how they shop;

(7)social, political and economic risks to our foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States;

(8)changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, our business, including those relating to our products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result;

(9)foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States;

(10)changes in global or local conditions, including those due to volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;

(11)impacts attributable to the COVID-19 pandemic, including disruptions to our global business;

(12)shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings;

(13)real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities;

(14)changes in product mix to products which are less profitable;

(15)our ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and within our cost estimates and our ability to maintain continuous operations of such systems and the security of data and other information that may be stored in such systems or other systems or media;

(16)our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;

67

THE ESTÉE LAUDER COMPANIES INC.

(17)consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;

(18)the timing and impact of acquisitions, investments and divestitures; and

(19)additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

We assume no responsibility to update forward-looking statements made herein or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is set forth in Item 2 of this Quarterly Report on Form 10-Q under the caption Liquidity and Capital Resources - Market Risk and is incorporated herein by reference.

Item 4. Controls and Procedures.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of March 31, 2022 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

As part of our review of internal control over financial reporting, we make changes to systems and processes to improve such controls and increase efficiencies, including from the impacts of COVID-19, while ensuring that we maintain an effective internal control environment. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the third quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see Notes to Consolidated Financial Statements, Note 9 – Contingencies.

68

THE ESTÉE LAUDER COMPANIES INC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share Repurchase Program

We are authorized by the Board of Directors to repurchase shares of our Class A Common Stock in the open market or in privately negotiated transactions, depending on market conditions and other factors. The following table provides information relating to our repurchase of Class A Common Stock during the referenced periods:

Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program(2)
January 2022	845,738	$	325.44	838,246	28,006,703
February 2022	365,988	303.78		365,988	27,640,715
March 2022	673,197	273.06		673,161	26,967,554
	1,884,923	302.53		1,877,395

(1)Includes shares that were repurchased by the Company to satisfy tax withholding obligations upon the payout of certain stock-based compensation arrangements.

(2)The Board of Directors has authorized the current repurchase program for up to 80.0 million shares. The total amount was last increased by the Board on October 31, 2018. Our repurchase program does not have an expiration date.

Subsequent to March 31, 2022 and as of April 26, 2022, we purchased approximately 0.6 million additional shares of our Class A Common Stock for $154 million pursuant to our share repurchase program.

Item 6. Exhibits.

Exhibit Number	Description
10.1	Amendment to amended and restated The Estée Lauder Companies Retirement Growth Account Plan, effective as of May 31, 2022 (SEC File No. 1-14064).†
31.1	Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO).
31.2	Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO). (furnished)
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO). (furnished)
101.1	The following materials from The Estée Lauder Companies Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
104	The cover page from The Estée Lauder Companies Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 is formatted in iXBRL
*Incorporated herein by reference.
† Exhibit is a management contract or compensatory plan or arrangement.

69

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE ESTÉE LAUDER COMPANIES INC.
	By:	/s/ TRACEY T. TRAVIS
Date: May 3, 2022		Tracey T. Travis
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

70

EX-10.1

Exhibit 10.1

AMENDMENT TO

THE ESTEE LAUDER COMPANIES RETIREMENT GROWTH ACCOUNT PLAN

The Estee Lauder Companies Retirement Growth Account Plan, as amended and restated effective as of January 1, 2019 (the “RGA Plan”), is hereby further amended, effective as of May 31, 2022, to add the following new Section 1.6 to the end of Appendix CC (“Provisions Governing Certain Employees of Alzheimer’s Drug Discovery Foundation”):

SECTION 1.6    CESSATION OF STATUS AS EMPLOYER

ADDF shall withdraw from and shall cease to be an Employer under the Plan effective as of May 31, 2022, and all Plan benefit accruals for ADDF Employees shall cease as of such date. Without limiting the foregoing,

(a)    Each ADDF Employee who has become a Participant in the Plan shall cease to be eligible for Retirement Account credits under Section 5.2 of the Plan after May 31, 2022 (eligibility for such credits for Plan Years beginning prior to such date shall be determined in accordance with the otherwise applicable provisions of the Plan), but shall remain eligible for Retirement Account credits under Section 5.4 of the Plan based on the Periodic Adjustment Percentage until the last date as of which a Retirement Account balance is maintained for such Participant.

(b)    For all purposes under the Plan, each ADDF Employee shall be treated as having terminated employment with the Employer as of May 31, 2022 or, if earlier, the date the ADDF Employee terminated employment with ADDF.

(c)    This Plan shall remain responsible for the payment of all Plan benefits accrued on behalf of ADDF Employees, which benefits shall be payable in accordance with the applicable provisions of the Plan. For Plan valuation purposes, such benefits shall be assigned to the same Group as includes Estee Lauder.

EX-31.1

Exhibit 31.1

Certification

I, Fabrizio Freda certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of The Estée Lauder Companies Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2022
	/s/ Fabrizio Freda
	Fabrizio Freda President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Tracey T. Travis certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of The Estée Lauder Companies Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2022
	/s/ Tracey T. Travis
	Tracey T. Travis Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to 18 U.S.C. Section 1350

(as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002)

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), the undersigned officer of The Estée Lauder Companies Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and the information contained in the 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 3, 2022
	/s/ Fabrizio Freda
	Fabrizio Freda President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) and for no other purpose.

EX-32.2

Exhibit 32.2

Certification

Pursuant to 18 U.S.C. Section 1350

(as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002)

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), the undersigned officer of The Estée Lauder Companies Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and the information contained in the 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 3, 2022
	/s/ Tracey T. Travis
	Tracey T. Travis Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) and for no other purpose.

XML

COVER PAGE - shares	9 Months Ended
	Mar. 31, 2022	Apr. 26, 2022
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	1-14064
Entity Registrant Name	Estée Lauder Companies Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	11-2408943
Entity Address, Address Line One	767 Fifth Avenue
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10153
City Area Code	212
Local Phone Number	572-4200
Title of 12(b) Security	Class A Common Stock, $.01 par value
Trading Symbol	EL
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001001250
Amendment Flag	false
Common Class A
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		231,805,171
Common Class B
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		125,542,029

XML

CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Net sales	$ 4,245	$ 3,864	$ 14,176	$ 12,279
Cost of sales	994	939	3,274	2,848
Gross profit	3,251	2,925	10,902	9,431
Operating expenses
Selling, general and administrative	2,275	2,145	7,554	6,761
Restructuring and other charges	22	131	41	172
Goodwill impairment	0	0	0	54
Impairment of other intangible and long-lived assets	216	33	216	60
Total operating expenses	2,513	2,309	7,811	7,047
Operating income	738	616	3,091	2,384
Interest expense	41	43	125	131
Interest income and investment income, net	5	9	19	40
Other components of net periodic benefit cost	(1)	2	(2)	12
Other income	0	0	1	0
Earnings before income taxes	703	580	2,988	2,281
Provision for income taxes	130	122	630	421
Net earnings	573	458	2,358	1,860
Net earnings attributable to noncontrolling interests	(3)	(2)	(8)	(8)
Net earnings attributable to redeemable noncontrolling interest	(12)	0	(12)	0
Net earnings attributable to The Estée Lauder Companies Inc.	$ 558	$ 456	$ 2,338	$ 1,852
Net earnings attributable to The Estée Lauder Companies Inc. per common share
Basic (in dollars per share)	$ 1.55	$ 1.25	$ 6.48	$ 5.10
Diluted (in dollars per share)	$ 1.53	$ 1.24	$ 6.39	$ 5.03
Weighted-average common shares outstanding
Basic (in shares)	359.2	363.6	360.7	362.9
Diluted (in shares)	363.6	369.0	365.8	368.1

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Statement of Comprehensive Income [Abstract]
Net earnings	$ 573	$ 458	$ 2,358	$ 1,860
Other comprehensive income (loss):
Net cash flow hedge gain (loss)	5	41	21	(16)
Retirement plan and other retiree benefit adjustments	4	7	12	19
Translation adjustments	28	(121)	(173)	170
Benefit (provision) for income taxes on components of other comprehensive income	(4)	(32)	(22)	6
Total other comprehensive income (loss), net of tax	33	(105)	(162)	179
Comprehensive income	606	353	2,196	2,039
Comprehensive income attributable to noncontrolling interests:
Net earnings	(3)	(2)	(8)	(8)
Translation adjustments	1	1	3	(1)
Total comprehensive income attributable to noncontrolling interests	(2)	(1)	(5)	(9)
Comprehensive income attributable to redeemable noncontrolling interest:
Net earnings	(12)	0	(12)	0
Translation adjustments	(14)	0	3	0
Total comprehensive income attributable to redeemable noncontrolling interest	(26)	0	(9)	0
Comprehensive income attributable to The Estée Lauder Companies Inc.	$ 578	$ 352	$ 2,182	$ 2,030

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Current assets
Cash and cash equivalents	$ 3,836	$ 4,958
Accounts receivable, net	2,209	1,702
Inventory and promotional merchandise	2,830	2,505
Prepaid expenses and other current assets	625	603
Total current assets	9,500	9,768
Property, plant and equipment, net	2,493	2,280
Other assets
Operating lease right-of-use assets	2,034	2,190
Goodwill	2,591	2,616
Other intangible assets, net	3,638	4,095
Other assets	1,103	1,022
Total other assets	9,366	9,923
Total assets	21,359	21,971
Current liabilities
Current debt	269	32
Accounts payable	1,470	1,692
Operating lease liabilities	388	379
Other accrued liabilities	3,287	3,195
Total current liabilities	5,414	5,298
Noncurrent liabilities
Long-term debt	5,188	5,537
Long-term operating lease liabilities	1,948	2,151
Other noncurrent liabilities	1,758	2,037
Total noncurrent liabilities	8,894	9,725
Contingencies
Redeemable Noncontrolling Interest	865	857
Equity
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at March 31, 2022 and June 30, 2021; shares issued: 467,516,898 at March 31, 2022 and 462,633,034 at June 30, 2021; Class B shares authorized: 304,000,000 at March 31, 2022 and June 30, 2021; shares issued and outstanding: 125,542,029 at March 31, 2022 and 128,242,029 at June 30, 2021	6	6
Paid-in capital	5,746	5,335
Retained earnings	14,076	12,244
Accumulated other comprehensive loss	(626)	(470)
Stockholders' equity before treasury stock	19,202	17,115
Less: Treasury stock, at cost; 235,234,161 Class A shares at March 31, 2022 and 229,115,665 Class A shares at June 30, 2021	(13,052)	(11,058)
Total stockholders’ equity – The Estée Lauder Companies Inc.	6,150	6,057
Noncontrolling interests	36	34
Total equity	6,186	6,091
Total liabilities, redeemable noncontrolling interest and equity	$ 21,359	$ 21,971

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2022	Jun. 30, 2021
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Treasury stock, shares	235,234,161	229,115,665
Common Class A
Common stock, shares authorized	1,300,000,000	1,300,000,000
Common stock, shares issued	467,516,898	462,633,034
Common Class B
Common stock, shares authorized	304,000,000	304,000,000
Common stock, shares issued	125,542,029	128,242,029
Common stock, shares outstanding	125,542,029	128,242,029

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities
Net earnings	$ 2,358	$ 1,860
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	546	475
Deferred income taxes	(90)	(103)
Non-cash stock-based compensation	283	255
Net loss on disposal of property, plant and equipment	6	19
Non-cash restructuring and other charges	2	97
Pension and post-retirement benefit expense	59	75
Pension and post-retirement benefit contributions	(30)	(35)
Goodwill, other intangible and long-lived asset impairments	216	114
Changes in fair value of contingent consideration	0	(2)
Gain on previously held equity method investment	(1)	0
Other non-cash items	(4)	(17)
Changes in operating assets and liabilities:
Increase in accounts receivable, net	(548)	(506)
Decrease (increase) in inventory and promotional merchandise	(398)	13
Increase in other assets, net	(61)	(122)
Increase (decrease) in accounts payable	(199)	55
Increase (decrease) in other accrued and noncurrent liabilities	(132)	629
Decrease in operating lease assets and liabilities, net	(38)	(30)
Net cash flows provided by operating activities	1,969	2,777
Cash flows from investing activities
Capital expenditures	(658)	(386)
Proceeds from purchase price refund	0	32
Payments for acquired businesses	(3)	(8)
Purchases of investments	(10)	(40)
Settlement of net investment hedges	108	(175)
Net cash flows used for investing activities	(563)	(577)
Cash flows from financing activities
Repayments of current debt, net	(4)	(746)
Proceeds from issuance of long-term debt, net	0	596
Debt issuance costs	(1)	(4)
Repayments and redemptions of long-term debt	(16)	(6)
Net proceeds from stock-based compensation transactions	127	180
Payments to acquire treasury stock	(1,998)	(316)
Dividends paid to stockholders	(624)	(561)
Payments to noncontrolling interest holders for dividends	0	(5)
Net cash flows used for financing activities	(2,516)	(862)
Effect of exchange rate changes on Cash and cash equivalents	(12)	39
Net increase (decrease) in Cash and cash equivalents	(1,122)	1,377
Cash and cash equivalents at beginning of period	4,958	5,022
Cash and cash equivalents at end of period	$ 3,836	$ 6,399

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation.

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $13 million and $(143) million, net of tax, during the three months ended March 31, 2022 and 2021, respectively, and $(182) million and $175 million, net of tax, during the nine months ended March 31, 2022 and 2021, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $3 million and $(3) million during the three months ended March 31, 2022 and March 31, 2021, respectively, and $(15) million and $(5) million during the nine months ended March 31, 2022 and 2021, respectively.

Concentration of Credit Risk

The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

The Company’s largest customer during the three and nine months ended March 31, 2022 sells products primarily in China travel retail. This customer accounted for $740 million or 17%, and $690 million, or 18%, of the Company's consolidated net sales for the three months ended March 31, 2022 and 2021, respectively, and $1,792 million, or 13%, and $1,898 million, or 15%, for the nine months ended March 31, 2022 and 2021, respectively. This customer accounted for $457 million, or 20%, and $179 million, or 10%, of the Company's accounts receivable at March 31, 2022 and June 30, 2021, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Raw materials	$	778	$	674
Work in process	336		330
Finished goods	1,454		1,213
Promotional merchandise	262		288
	$	2,830	$	2,505

Property, Plant and Equipment

Property, plant and equipment consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Assets (Useful Life)
Land	$	56	$	55
Buildings and improvements (10 to 40 years)	496		256
Machinery and equipment (3 to 10 years)	992		920
Computer hardware and software (4 to 10 years)	1,428		1,303
Furniture and fixtures (5 to 10 years)	129		125
Leasehold improvements	2,307		2,312
Construction in progress	589		647
	5,997		5,618
Less accumulated depreciation and amortization	(3,504)		(3,338)
	$	2,493	$	2,280

Depreciation and amortization of property, plant and equipment was $140 million and $129 million during the three months ended March 31, 2022 and 2021, respectively, and $406 million and $380 million during the nine months ended March 31, 2022 and 2021, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

Leases

The Company recognized $33 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the three and nine months ended March 31, 2021. The fiscal 2021 impairments related to other assets (i.e. rights associated with commercial operating leases), operating lease right-of-use assets and the related property, plant and equipment in certain freestanding stores primarily in Europe. The impairments were due to the negative impacts of the COVID-19 pandemic. For the three and nine months ended March 31, 2022, the Company did not recognize any long-lived asset impairments.

Income Taxes

The effective rate for income taxes for the three and nine months ended March 31, 2022 and 2021 are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
	2022		2021		2022		2021
Effective rate for income taxes	18.5	%	21.0	%	21.1	%	18.5	%
Basis-point change from the prior-year period	(250)				260

The effective tax rate for the three and nine months ended March 31, 2021 included the retroactive impact relating to fiscal 2020 and 2019 of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. The impact of the final issuance of GILTI tax regulations with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second and third quarters of fiscal 2021 and resulted in reductions of 30 basis points and 220 basis points to the effective tax rates for the three and nine months ended March 31, 2021, respectively.

For the three months ended March 31, 2022, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations, partially offset by a decrease in excess tax benefits associated with stock-based compensation arrangements.

For the nine months ended March 31, 2022, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company’s foreign operations, which includes the retroactive impact of the final GILTI tax regulations recognized in the prior period. Also contributing to the increase was a decrease in excess tax benefits associated with stock-based compensation arrangements.

As of March 31, 2022 and June 30, 2021, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $63 million and $62 million, respectively. The total amount of unrecognized tax benefits at March 31, 2022 that, if recognized, would affect the effective tax rate was $53 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2022 in the accompanying consolidated statements of earnings was $1 million and $5 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021, was $15 million and $14 million, respectively. On the basis of the information available as of March 31, 2022, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

During the fiscal 2022 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2020 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and nine months ended March 31, 2022.

Other Accrued and Noncurrent Liabilities

Other accrued liabilities consist of the following:

(In millions)	March 31, 2022		June 30, 2021
Advertising, merchandising and sampling	$	322	$	294
Employee compensation	582		670
Deferred revenue	313		322
Payroll and other non-income taxes	321		359
Accrued income taxes	299		237
Other	1,450		1,313
	$	3,287	$	3,195

At March 31, 2022 and June 30, 2021, total Other noncurrent liabilities of $1,758 million and $2,037 million included $744 million and $849 million of deferred tax liabilities, respectively.

Recently Adopted Accounting Standards

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter.

Impact on consolidated financial statements – On July 1, 2021, the Company adopted this standard and recorded a cumulative adjustment of $121 million as an increase to its fiscal 2022 opening retained earnings balance to derecognize a deferred tax liability related to a previously held equity method investment that became a foreign subsidiary.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848 “ASC 848”)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform.

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company currently has an implementation team in place that is performing a comprehensive evaluation and assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company does not expect any qualifying contract modifications related to reference rate reform and therefore does not expect that the optional guidance in ASC 848 will need to be applied through December 31, 2022. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2022.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

XML

ACQUISITION OF BUSINESSES

9 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

ACQUISITION OF BUSINESSES

ACQUISITION OF BUSINESS

On May 18, 2021, the Company acquired additional shares in Deciem Beauty Group Inc. (“DECIEM”), a Toronto-based skin care company, for $1,092 million in cash, including proceeds from the issuance of debt. DECIEM is a multi-brand beauty company with a brand portfolio that includes The Ordinary and NIOD. This acquisition is expected to further strengthen the Company’s leadership position in prestige skin care, expand its global consumer reach and complement its business in the online and specialty-multi channels. The Company originally acquired a minority interest in DECIEM in June 2017. The minority interest was accounted for as an equity method investment, which had a carrying value of $65 million at the acquisition date. The acquisition of additional shares increased the Company's fully diluted equity interest from approximately 29% to approximately 76% and was considered a step acquisition. On a fully diluted basis, the DECIEM stock options, discussed below, approximated 4% of the total capital structure. Accordingly, for purposes of determining the consideration transferred, the Company excluded the DECIEM stock options, which resulted in an increase in the Company’s post-acquisition undiluted equity interest from approximately 30% to approximately 78% and the post-acquisition undiluted equity interest of the remaining noncontrolling interest holders of approximately 22%. The Company remeasured the previously held equity method investment to its fair value of $913 million, resulting in the recognition of a gain of $848 million. As part of the increase in the Company's investment, the Company was granted the right to purchase (“Call Option”), and granted the remaining investors a right to sell to the Company (“Put Option”), the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM (the “net Put (Call) Option”). As a result of this redemption feature, the Company recorded redeemable noncontrolling interest, at its acquisition‑date fair value, that is classified as mezzanine equity in the consolidated balance sheets at June 30, 2021. The accounting for the DECIEM business combination was finalized as of March 31, 2022.

A summary of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2022, is as follows:

(In millions)	March 31, 2022
Cash paid	$	1,095
Fair value of DECIEM stock options liability	104
Fair value of net Put (Call) Option	233
Total consideration for the acquired ownership interest (approximately 47.9%)	1,432
Fair value of previously held equity method investment (approximately 30.5%)	913
Fair value of redeemable noncontrolling interest (approximately 21.6%)	647
Total consideration transferred (100%)	$	2,992

As part of the acquisition of additional shares, DECIEM stock options were issued in replacement of and exchange for certain vested and unvested stock options previously issued by DECIEM. The total fair value of the DECIEM stock options of $295 million was recorded as part of the total consideration transferred, comprising of $191 million of Cash paid for vested options settled as of the acquisition date and $104 million reported as a stock options liability on the Company's consolidated balance sheet as it is not an assumed liability of DECIEM and is expected to be settled in cash upon completion of the exercise of the Put (Call). The acquisition-date fair value of the DECIEM stock options liability was calculated by multiplying the acquisition-date fair value by the number of DECIEM stock options replaced the day after the acquisition date. The stock options replaced consist of vested and partially vested stock options. See Note 10 – Stock Programs for information relating to the DECIEM stock options.

The acquisition-date fair value of the previously held equity method investment was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,992 million by the related effective previously held equity interest of approximately 30.5%.

The acquisition-date fair value of the redeemable noncontrolling interest includes the acquisition-date fair value of the net Put (Call) Option of $233 million. The remaining acquisition-date fair value of the redeemable noncontrolling interest of $647 million was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,992 million by the related noncontrolling interest of approximately 21.6%.

The acquisition-date fair values of the DECIEM stock options and the net Put (Call) Option were calculated by incorporating significant assumptions including the starting equity value, revenue growth rates and EBITDA and the following key assumptions into the Monte Carlo Method:

	May 18, 2021
Risk-free rate	0.50%
Term to mid of last twelve-month period	2.54 years
Operating leverage adjustment	0.45
Net sales discount rate	3.30%
EBITDA discount rate	6.80%
EBITDA volatility	38.30%
Net sales volatility	17.20%

The Company recorded a preliminary allocation of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The total consideration transferred includes the cash paid at closing, the fair value of its previously held equity method investment, the fair value of the redeemable noncontrolling interest, including the fair value of the net Put (Call) Option, and the fair value of the DECIEM stock options liability. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. To determine the acquisition date estimated fair value of intangible assets acquired, the Company applied the income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for trademarks. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted-average cost of capital used to discount future cash flows, and a customer attrition rate for customer relationships and royalty rates for trademarks. The final allocation of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2022, has been recorded as follows:

(In millions)	March 31, 2022
Cash	$	35
Accounts receivable	64
Inventory	190
Other current assets	33
Property, plant and equipment	40
Operating lease right-of-use assets	40
Intangible assets	1,917
Goodwill	1,296
Deferred income taxes	8
Total assets acquired	3,623
Accounts payable	21
Operating lease liabilities	8
Other accrued liabilities	78
Deferred income taxes	479
Long-term operating lease liabilities	45
Total liabilities assumed	631
Total consideration transferred	$	2,992

The results of operations for DECIEM and acquisition-related costs were not material to the Company's consolidated statements of earnings for the three and nine months ended March 31, 2022. Pro forma results of operations for the fiscal 2021 periods reflecting the acquisition of DECIEM are not presented, as the impact on the Company’s consolidated financial results would not have been material.

XML

GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

As previously discussed in Note 2 – Acquisition of Business, in May 2021 the Company increased its investment in DECIEM, which resulted in the inclusion of additional goodwill of $1,296 million, amortizable intangible assets (customer lists) of $701 million with amortization periods of 7 years to 14 years, and non-amortizable intangible assets (trademarks) of $1,216 million. Goodwill associated with the acquisition is primarily attributable to the future revenue growth opportunities associated with sales growth in the skin care category, as well as the value associated with DECIEM's assembled workforce. As such, the goodwill has been allocated to the Company’s skin care product category. The goodwill recorded in connection with this acquisition is not deductible for tax purposes.

Goodwill

The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2021
Goodwill	$	1,786	$	1,214	$	262	$	355	$	3,617
Accumulated impairments	(141)		(830)		(30)		—		(1,001)
	1,645		384		232		355		2,616
Goodwill measurement period adjustment	13		—		—		—		13
Translation adjustments, goodwill	(34)		—		(6)		—		(40)
Translation adjustments, accumulated impairments	2		—		—		—		2
	(19)		—		(6)		—		(25)
Balance as of March 31, 2022
Goodwill	1,765		1,214		256		355		3,590
Accumulated impairments	(139)		(830)		(30)		—		(999)
	$	1,626	$	384	$	226	$	355	$	2,591

Other Intangible Assets

Other intangible assets consist of the following:

	March 31, 2022						June 30, 2021
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	2,208	$	660	$	1,548	$	2,273	$	544	$	1,729
License agreements	43		43		—		43		43		—
	$	2,251	$	703	1,548		$	2,316	$	587	1,729
Non-amortizable intangible assets:
Trademarks and other					2,090						2,366
Total intangible assets					$	3,638					$	4,095

The aggregate amortization expense related to amortizable intangible assets was $38 million and $25 million for the three months ended March 31, 2022 and 2021, respectively, and $122 million and $77 million for the nine months ended March 31, 2022 and 2021, respectively.

The estimated aggregate amortization expense for the remainder of fiscal 2022 and for each of the next four fiscal years is as follows:

	Fiscal
(In millions)	2022		2023		2024		2025		2026
Estimated aggregate amortization expense	$	39	$	155	$	154	$	154	$	154

Impairment Testing During the Nine Months Ended March 31, 2022

During the fiscal 2022 third quarter, given the lower-than-expected results from international expansion to areas that continue to be impacted by COVID-19, the Company made revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. As of March 31, 2022, the remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $11 million reducing the carrying value to zero.

During the fiscal 2022 third quarter, given the lower-than-expected growth within key geographic regions and channels for Dr.Jart+ that continue to be impacted by the spread of COVID-19 variants and resurgence in cases and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, the lower than expected growth in key retail channels for DECIEM, and the lower than expected results from international expansion to areas that continue to be impacted by COVID-19 for Too Faced, the Company made revisions to the internal forecasts relating to its Dr. Jart+, DECIEM and Too Faced reporting units.

The Company concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022. The Company concluded that the carrying amounts of the long-lived assets were recoverable. For the Dr.Jart+ reporting unit, the Company also concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge. For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, the Company did not record impairment charges. As of March 31, 2022, the estimated fair values of Too Faced’s and DECIEM's trademarks exceeded their carrying values by 13% and 3%, respectively. For the Too Faced and DECIEM trademark intangible assets, if all other assumptions are held constant, an increase of 100 basis points and 50 basis points, respectively, in the weighted average cost of capital would result in an impairment charge. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair value of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair value of the Dr. Jart+ trademark intangible asset was the weighted-average cost of capital, which was 10.5%.

A summary of the impairment charges for the three and nine months ended March 31, 2022 and the remaining trademark and goodwill carrying values as of March 31, 2022, for each reporting unit, are as follows:

(In millions)		Impairment Charge				Carrying Value
Reporting Unit:	Geographic Region	Trademarks		Goodwill		Trademarks		Goodwill
GLAMGLOW	The Americas	$	11	$	—	$	—	$	—
Dr. Jart+	Asia/Pacific	205		—		486		332
Total		$	216	$	—	$	486	$	332

The impairment charges for the three and nine months ended March 31, 2022 were reflected in the skin care product category.

Impairment Testing During the Nine Months Ended March 31, 2021

During November 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company and lower than expected results from geographic expansion, the Company made further revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020. The Company concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $21 million. In addition, the Company concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $6 million. The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020. After adjusting the carrying values of the trademark and customer lists intangible assets, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The impairment charges for the nine months ended March 31, 2021 were reflected in the skin care product category and in the Americas region. As of March 31, 2021, the remaining carrying value of the trademark related to the GLAMGLOW reporting unit was $36 million.

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

9 Months Ended

Mar. 31, 2022

Restructuring and Related Activities [Abstract]

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Charges associated with the Post-COVID Business Acceleration Program for the three and nine months ended March 31, 2022 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Three months ended March 31, 2022	$	1	$	—	$	17	$	1	$	19
Nine months ended March 31, 2022	$	3	$	(2)	$	24	$	6	$	31

Charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.

Post-COVID Business Acceleration Program

On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign the Company's business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.

The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of the Company’s distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.

As of March 31, 2022, the Company estimates a net reduction over the duration of the PCBA Program in the range of 2,000 to 2,500 positions globally, including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. The Company also estimates the closure over the duration of the PCBA Program of approximately 10% to 15% of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.

The Company plans to approve specific initiatives under the PCBA Program through fiscal 2022 and expects to substantially complete those initiatives through fiscal 2023. The Company expects that the PCBA Program will result in related restructuring and other charges totaling between $400 million and $500 million, before taxes.

PCBA Program Approvals

Total PCBA Program cumulative charges (adjustments) approved by the Company through March 31, 2022 were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Cumulative through June 30, 2021	$	42	$	(6)	$	257	$	21	$	314
Nine months ended March 31, 2022	(19)		9		5		2		(3)
Cumulative through March 31, 2022	$	23	$	3	$	262	$	23	$	311

Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through March 31, 2022 by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2021	$	132	$	108	$	13	$	4	$	257
Nine months ended March 31, 2022	3		4		(1)		(1)		5
Cumulative through March 31, 2022	$	135	$	112	$	12	$	3	$	262

Specific actions taken since the PCBA Program inception include:

•Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels in certain areas of its distribution network and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores, counters and other retail locations, mainly in certain affiliates across all geographic regions, including the Company's travel retail network. These anticipated closures reflect changing consumer behaviors including higher demand for online and omnichannel capabilities. These activities will result in a net reduction in workforce, inventory and other asset write-offs, product returns, and termination of contracts.

•Optimize Digital Organization and Other Go-To-Market Organizations – The Company approved initiatives to enhance its go-to-market capabilities and shift more resources to support online growth. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities.

•Optimize Select Marketing, Brand and Global Functions – The Company has started to reduce its corporate office footprint and is moving toward the future of work in a post-COVID environment, by restructuring where and how its employees work and collaborate. These actions will result primarily in lease termination fees.

•Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and the sustainability of long-term investments, the decision was made to exit the global distribution of BECCA products due to its limited distribution, the ongoing decline in product demand and the challenging environment caused by the COVID-19 pandemic. These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance. The Company expects to substantially complete these initiatives during fiscal 2022.

•Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it is not renewing its existing license agreements for Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna when they expire in June 2023. The Company expects to continue to sell products under these licenses through June 30, 2022. These actions resulted in, or are expected to result in, employee-related costs, asset write-offs, including charges for the impairment of goodwill, and consulting and legal fees.

PCBA Program Restructuring and Other Charges

Restructuring charges are comprised of the following:

Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.

Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets in certain freestanding stores (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. These costs also include goodwill and other intangible asset impairment charges relating to the exit of the global distribution of BECCA products.

Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration.

Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees.

Other charges associated with restructuring activities are comprised of the following:

Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured.

Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating expenses as incurred and primarily include the following:

•Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof;

•Temporary labor backfill;

•Costs to establish and maintain a PMO for the duration of the PCBA Program, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities); and

•Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative.

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments)
Cumulative through June 30, 2021	$	14	$	2	$	201	$	4	$	221
Nine months ended March 31, 2022	3		(2)		24		6		31
Cumulative through March 31, 2022	$	17	$	—	$	225	$	10	$	252

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2021	$	119	$	75	$	6	$	1	$	201
Nine months ended March 31, 2022	5		7		11		1		24
Cumulative through March 31, 2022	$	124	$	82	$	17	$	2	$	225

Changes in accrued restructuring charges for the nine months ended March 31, 2022 relating to the PCBA Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2021	$	101	$	—	$	—	$	—	$	101
Charges	5		7		11		1		24
Cash payments	(39)		—		(11)		(1)		(51)
Non-cash asset write-offs	—		(7)		—		—		(7)
Translation and other adjustments	(7)		—		—		—		(7)
Balance at March 31, 2022	$	60	$	—	$	—	$	—	$	60

Accrued restructuring charges at March 31, 2022 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $23 million, $30 million and $7 million for the remainder of fiscal 2022 and for fiscal 2023 and 2024, respectively.

Between April 1, 2022 and April 26, 2022, the Company approved certain initiatives under the PCBA Program within areas of Optimize Distribution Network and Optimize Select Marketing, Brand and Global Functions. These initiatives pertain primarily to asset write-offs to close an underperforming freestanding store and the optimization of where and how employees work and collaborate.

Once the relevant accounting criteria have been met, the Company expects to record restructuring and other charges of approximately $50 million (before tax) in connection with these initiatives.

The following presents the restructuring initiatives approved from April 1, 2022 to April 26, 2022 by major cost type:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Approval Period
April 1, 2022 - April 26, 2022	$	—	$	—	$	50	$	—	$	50

Included in the above table, cumulative restructuring initiatives approved by the Company from April 1, 2022 to April 26, 2022 were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Approval Period
April 1, 2022 - April 26, 2022	$	—	$	34	$	16	$	—	$	50

Leading Beauty Forward Program

The Company substantially completed initiatives approved under the Leading Beauty Program (the “LBF Program”) through fiscal 2021. Additional information about the LBF Program is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

XML

DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. The Company enters into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At March 31, 2022, the notional amount of derivatives not designated as hedging instruments was $3,887 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.

For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively.

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value (1)					Fair Value (1)
(In millions)	Balance Sheet Location	March 31, 2022		June 30, 2021		Balance Sheet Location	March 31, 2022		June 30, 2021
Derivatives Designated as Hedging Instruments:
Foreign currency cash flow hedges	Prepaid expenses and other current assets	$	21	$	12	Other accrued liabilities	$	22	$	20
Net investment hedges	Prepaid expenses and other current assets	15		34		Other accrued liabilities	—		—
Interest rate-related derivatives	Prepaid expenses and other current assets	10		15		Other accrued liabilities	71		—
Total Derivatives Designated as Hedging Instruments		46		61			93		20
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	23		6		Other accrued liabilities	25		36
Total derivatives		$	69	$	67		$	118	$	56

(1)See Note 6 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Earnings	Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
	Three Months Ended March 31					Three Months Ended March 31
(In millions)	2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(2)	$	22	Net sales	$	3	$	(7)
Interest rate-related derivatives	10		11		Interest expense	—		(1)
	8		33			3		(8)
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	17		125			—		—
Total derivatives	$	25	$	158		$	3	$	(8)

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the three months ended March 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $3 million and $5 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Earnings	Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
	Nine Months Ended March 31					Nine Months Ended March 31
(In millions)	2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	5	$	(43)	Net sales	$	(5)	$	(11)
Interest rate-related derivatives	10		14		Interest expense	(1)		(2)
	15		(29)			(6)		(13)
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	87		(17)			—		—
Total derivatives	$	102	$	(46)		$	(6)	$	(13)

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the nine months ended March 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $8 million and $15 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

		Amount of Gain (Loss) Recognized in Earnings on Derivatives (1)
	Location of Gain (Loss) Recognized in Earnings on Derivatives
		Three Months Ended March 31				Nine Months Ended March 31
(In millions)		2022		2021		2022		2021
Derivatives in Fair Value Hedging Relationships:
Interest rate swap contracts	Interest expense	$	(69)	$	(18)	$	(85)	$	(23)

(1)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions)
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included	Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability
	March 31, 2022		March 31, 2022
Current debt	$	251	$	1
Long-term debt	921		(71)
Total debt	$	1,172	$	(70)

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

	Three Months Ended March 31
	2022				2021
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	4,245	$	41	$	3,864	$	43
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		69		Not applicable		18
Derivatives designated as hedging instruments	Not applicable		(69)		Not applicable		(18)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		—		Not applicable		(1)
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	3		Not applicable		(7)		Not applicable

	Nine Months Ended March 31
	2022				2021
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	14,176	$	125	$	12,279	$	131
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		85		Not applicable		23
Derivatives designated as hedging instruments	Not applicable		(85)		Not applicable		(23)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		(1)		Not applicable		(2)
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(5)		Not applicable		(11)		Not applicable

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

		Amount of Gain (Loss) Recognized in Earnings on Derivatives
	Location of Gain (Loss) Recognized in Earnings on Derivatives	Three Months Ended March 31				Nine Months Ended March 31
(In millions)		2022		2021		2022		2021
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Selling, general and administrative	$	17	$	(97)	$	(32)	$	(34)

Cash Flow Hedges

The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of December 2023. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At March 31, 2022, the Company had cash flow hedges outstanding with a notional amount totaling $1,563 million.

The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.

For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses in AOCI are reclassified to sales when the underlying forecasted transaction occurs. If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period sales. As of March 31, 2022, the Company’s foreign currency cash flow hedges were highly effective.

The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of March 31, 2022 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $1 million. The accumulated net gain (loss) on derivative instruments in AOCI was $20 million and $(1) million as of March 31, 2022 and June 30, 2021, respectively.

Fair Value Hedges

The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. The Company has interest rate swap agreements, with notional amounts totaling $250 million, $700 million and $300 million to effectively convert the fixed rate interest on its 2022 Senior Notes, 2030 Senior Notes and 2031 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Net Investment Hedges

The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of July 2022. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At March 31, 2022, the Company had net investment hedges outstanding with a notional amount totaling $1,372 million.

Credit Risk

As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $69 million at March 31, 2022. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote.

XML

FAIR VALUE MEASUREMENTS

9 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1:    Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:    Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:    Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	1,019	$	—	$	—	$	1,019
Foreign currency forward contracts	—		59		—		59
Interest rate-related derivatives	—		10		—		10
Total	$	1,019	$	69	$	—	$	1,088
Liabilities:
Foreign currency forward contracts	$	—	$	47	$	—	$	47
Interest rate-related derivatives	—		71		—		71
DECIEM stock options	—		—		74		74
Total	$	—	$	118	$	74	$	192

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,079	$	—	$	—	$	2,079
Foreign currency forward contracts	—		52		—		52
Interest rate-related derivatives	—		15		—		15
Total	$	2,079	$	67	$	—	$	2,146
Liabilities:
Foreign currency forward contracts	$	—	$	56	$	—	$	56
DECIEM stock options	—		—		141		141
Total	$	—	$	56	$	141	$	197

The estimated fair values of the Company’s financial instruments are as follows:

	March 31, 2022				June 30, 2021
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	3,836	$	3,836	$	4,958	$	4,958
Current and long-term debt	5,457		5,607		5,569		6,262
DECIEM stock options	74		74		141		141
Derivatives
Foreign currency forward contracts – asset (liability), net	12		12		(4)		(4)
Interest rate-related derivatives – asset (liability), net	(61)		(61)		15		15

The following table presents the Company’s impairment charges for the nine months ended March 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value(1)
Other intangible assets, net (trademarks)
GLAMGLOW	$	11	March 31, 2022	$	—
Dr. Jart+	205		February 28, 2022	486
Total	216			486
Total	$	216		$	486

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the nine months ended March 31, 2021 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value(1)
Goodwill
GLAMGLOW	$	54	November 30, 2020	$	—
BECCA(2)	13		February 28, 2021	—
Total	67			—
Other intangible assets, net (trademark and customer lists)
GLAMGLOW	27		November 30, 2020	36
BECCA(2)	34		February 28, 2021	—
Total	61			36
Long-lived assets	33		March 31, 2021	35
Total	$	161		$	71

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

(2)See Note 4 – Charges Associated with Restructuring and Other Activities for further information relating to goodwill and other intangible asset impairment charges recorded in connection with the exit of the global distribution of BECCA products.

The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value due to the short maturity of cash equivalent instruments.

Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months.

Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services.

Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy.

DECIEM stock options – The stock option liability represents the employee stock options issued by DECIEM in replacement and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM, in connection with the Company's acquisition of DECIEM. The DECIEM stock options are subject to the terms and conditions of DECIEM's 2021 Stock Option Plan. The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date. The acquisition date fair value was calculated using the Monte Carlo Method, which requires certain assumptions. Significant changes in the projected future operating results would result in a higher or lower fair value measurement. Changes to the discount rates or volatilities would have a lesser effect. These inputs are categorized as Level 3 of the valuation hierarchy. The DECIEM stock options are remeasured to fair value at each reporting date through the period when the options are exercised or repurchased (i.e., when they are settled), with an offsetting entry to compensation expense. See Note 2 – Acquisition of Business and Note 10 – Stock Programs for discussion.

Changes in the DECIEM stock option liability for the nine months ended March 31, 2022 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions)	Fair Value
DECIEM stock option liability as of June 30, 2021	$	141
Changes in fair value, net of foreign currency remeasurements(1)	(58)
Translation adjustments and other, net	(9)
DECIEM stock option liability as of March 31, 2022	$	74

(1)Amount includes expense attributable to graded vesting of stock options which is not material for the nine months ended March 31, 2022.

XML

REVENUE RECOGNITION

9 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION

The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Accounts Receivable

Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $36 million and $40 million as of March 31, 2022 and June 30, 2021, respectively. Payment terms are short-term in nature and are generally less than one year.

Changes in the allowance for credit losses are as follows:

(In millions)	March 31, 2022
Balance at June 30, 2021	$	20
Adjustment for expected credit losses	(2)
Write-offs, net & other	(1)
Balance at March 31, 2022	$	17

The remaining balance of the allowance for doubtful accounts of $19 million, as of March 31, 2022, relates to non-credit losses, which are primarily due to customer deductions.

Deferred Revenue

Changes in deferred revenue during the period are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Deferred revenue, beginning of period	$	421	$	420	$	371	$	279
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(40)		(25)		(288)		(198)
Revenue deferred (released) during the period	(13)		(30)		285		278
Other	(4)		(4)		(4)		2
Deferred revenue, end of period	$	364	$	361	$	364	$	361

Transaction Price Allocated to the Remaining Performance Obligations

At March 31, 2022, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $313 million. The remaining balance of deferred revenue at March 31, 2022 will be recognized beyond the next twelve months.

XML

PENSION AND POST-RETIREMENT BENEFIT PLANS

9 Months Ended

Mar. 31, 2022

Retirement Benefits [Abstract]

PENSION AND POST-RETIREMENT BENEFIT PLANS

PENSION AND POST-RETIREMENT BENEFIT PLANS

The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

The components of net periodic benefit cost for the three months ended March 31, 2022 and 2021 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2022		2021		2022		2021		2022		2021
Service cost	$	12	$	12	$	8	$	9	$	1	$	2
Interest cost	8		8		3		2		1		1
Expected return on plan assets	(14)		(14)		(4)		(4)		—		(1)
Amortization of:
Actuarial loss	4		5		—		1		—		—
Prior service cost	—		—		—		—		—		—
Settlements	—		—		—		1		—		—
Special termination benefits	—		—		1		1		—		—
Net periodic benefit cost	$	10	$	11	$	8	$	10	$	2	$	2

The components of net periodic benefit cost for the nine months ended March 31, 2022 and 2021 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2022		2021		2022		2021		2022		2021
Service cost	$	35	$	34	$	24	$	27	$	2	$	2
Interest cost	23		23		8		7		4		4
Expected return on plan assets	(41)		(40)		(11)		(10)		(1)		(1)
Amortization of:
Actuarial loss	11		15		1		3		1		—
Prior service cost	—		—		(1)		—		—		—
Settlements	—		—		—		1		—		—
Special termination benefits	—		—		4		10		—		—
Net periodic benefit cost	$	28	$	32	$	25	$	38	$	6	$	5

During the nine months ended March 31, 2022, the Company made contributions to its international pension plans totaling $17 million.

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions)	March 31, 2022		June 30, 2021
Other assets	$	142	$	162
Other accrued liabilities	(28)		(28)
Other noncurrent liabilities	(426)		(432)
Funded status	(312)		(298)
Accumulated other comprehensive loss	229		242
Net amount recognized	$	(83)	$	(56)

XML

CONTINGENCIES

9 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

CONTINGENCIES

Legal Proceedings

The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including employment, intellectual property, real estate, environmental, regulatory, advertising, trade relations, tax, privacy, and product liability matters (including asbestos-related claims). Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements.

XML

STOCK PROGRAMS

9 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

STOCK PROGRAMS

STOCK PROGRAMS

Additional information relating to the Company's stock programs and the DECIEM stock options are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

The Company's Stock Programs

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units and share units. Compensation expense attributable to net stock-based compensation was $91 million and $86 million for the three months ended March 31, 2022 and 2021, respectively, and was $283 million and $255 million for the nine months ended March 31, 2022 and 2021, respectively.

Stock Options

During the nine months ended March 31, 2022, the Company granted stock options in respect of approximately 1.1 million shares of Class A Common Stock with an exercise price per share of $344.09 and a weighted-average grant date fair value per share of $85.56. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2022 was $248 million.

Restricted Stock Units

The Company granted RSUs in respect of approximately 0.7 million shares of Class A Common Stock during the nine months ended March 31, 2022 with a weighted-average grant date fair value per share of $340.18 that, at the time of grant, are scheduled to vest at 0.2 million, 0.2 million, and 0.3 million shares per year, in fiscal 2023, fiscal 2024 and fiscal 2025, respectively. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant.

Performance Share Units

During the nine months ended March 31, 2022, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $344.06, which will be settled in stock subject to the achievement of the Company’s net sales and diluted net earnings per common share for the three fiscal years ending June 30, 2024, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant.

In September 2021, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.2 million PSUs with a performance period ended June 30, 2021.

DECIEM Stock Options

The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are remeasured to fair value at each reporting date through date of settlement. Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options. Due to a reduction in the fair value of the DECIEM stock options, the total stock option expense for the three and nine months ended March 31, 2022 resulted in income of $60 million and $58 million, respectively, net of foreign currency remeasurements. There were no DECIEM stock options exercised during the nine months ended March 31, 2022.

The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date. As discussed in Note 2 – Acquisition of Business, DECIEM stock options, with total fair value of $295 million, were reported as part of the total consideration transferred. The DECIEM stock options are reported as a stock option liability of $74 million and $141 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021, respectively. The fair value of the stock options were calculated using the following key assumptions into the Monte Carlo Method:

	March 31, 2022	June 30, 2021	May 18, 2021
Risk-free rate	1.80%	0.50%	0.50%
Term to mid of last twelve-month period	1.67 years	2.42 years	2.54 years
Operating leverage adjustment	0.45	0.45	0.45
Net sales discount rate	5.00%	3.40%	3.30%
EBITDA discount rate	8.90%	6.90%	6.80%
EBITDA volatility	34.00%	37.70%	38.30%
Net sales volatility	15.30%	17.00%	17.20%

XML

NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE

9 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE

Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met. Net earnings attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards.

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

	Three Months Ended March 31				Nine Months Ended March 31
(In millions, except per share data)	2022		2021		2022		2021
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$	558	$	456	$	2,338	$	1,852
Denominator:
Weighted-average common shares outstanding – Basic	359.2		363.6		360.7		362.9
Effect of dilutive stock options	3.5		4.1		3.9		3.9
Effect of PSUs	0.2		0.2		0.2		0.2
Effect of RSUs	0.7		1.1		1.0		1.1
Weighted-average common shares outstanding – Diluted	363.6		369.0		365.8		368.1
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic	$	1.55	$	1.25	$	6.48	$	5.10
Diluted	$	1.53	$	1.24	$	6.39	$	5.03

The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows:

	Three Months Ended March 31		Nine Months Ended March 31
(In millions)	2022	2021	2022	2021
Stock options	1.0	—	0.8	0.9
RSUs and PSUs	—	—	0.1	0.1

As of March 31, 2022 and 2021, 0.7 million and 0.9 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 10 – Stock Programs.

XML

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

9 Months Ended

Mar. 31, 2022

Equity [Abstract]

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

EQUITY AND REDEEMABLE NONCONTROLLING INTERESTTotal Stockholders’ Equity – The Estée Lauder Companies Inc.

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Common stock, beginning of the period	$	6	$	6	$	6	$	6
Stock-based compensation	—		—		—		—
Common stock, end of the period	6		6		6		6
Paid-in capital, beginning of the period	5,605		5,068		5,335		4,790
Common stock dividends	2		1		3		2
Stock-based compensation	139		162		408		439
Paid-in capital, end of the period	5,746		5,231		5,746		5,231
Retained earnings, beginning of the period	13,735		11,159		12,244		10,134
Common stock dividends	(217)		(195)		(627)		(563)
Net earnings attributable to The Estée Lauder Companies Inc.	558		456		2,338		1,852
Cumulative effect of adoption of new accounting standards	—		—		121		(3)
Retained earnings, end of the period	14,076		11,420		14,076		11,420
Accumulated other comprehensive loss, beginning of the period	(646)		(383)		(470)		(665)
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc.	20		(104)		(156)		178
Accumulated other comprehensive loss, end of the period	(626)		(487)		(626)		(487)
Treasury stock, beginning of the period	(12,482)		(10,429)		(11,058)		(10,330)
Acquisition of treasury stock	(568)		(212)		(1,850)		(212)
Stock-based compensation	(2)		(1)		(144)		(100)
Treasury stock, end of the period	(13,052)		(10,642)		(13,052)		(10,642)
Total stockholders’ equity – The Estée Lauder Companies Inc.	6,150		5,528		6,150		5,528
Noncontrolling interests, beginning of the period	34		35		34		27
Net earnings attributable to noncontrolling interests	3		2		8		8
Distribution to noncontrolling interest holders	—		(6)		—		(6)
Translation adjustments and other, net	(1)		(1)		(6)		1
Noncontrolling interests, end of the period	36		30		36		30
Total equity	$	6,186	$	5,558	$	6,186	$	5,558
Redeemable noncontrolling interest, beginning of the period	$	840	$	—	$	857	$	—
Net earnings attributable to redeemable noncontrolling interest	12		—		12		—
Translation adjustments	14		—		(3)		—
Adjustment of redeemable noncontrolling interest to redemption value	(1)		—		(1)		—
Redeemable noncontrolling interest, end of the period	$	865	$	—	$	865	$	—
Cash dividends declared per common share	$	.60	$	.53	$	1.73	$	1.54

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2022:

Date Declared	Record Date	Payable Date	Amount per Share
August 18, 2021	August 31, 2021	September 15, 2021	$	.53
November 1, 2021	November 30, 2021	December 15, 2021	$	.60
February 2, 2022	February 28, 2022	March 15, 2022	$	.60

On May 2, 2022, a dividend was declared in the amount of $.60 per share on the Company’s Class A and Class B Common Stock. The dividend is payable in cash on June 15, 2022 to stockholders of record at the close of business on May 31, 2022.

Common Stock

During the nine months ended March 31, 2022, the Company purchased approximately 6.2 million shares of its Class A Common Stock for $1,998 million.

During the nine months ended March 31, 2022, 2.7 million shares of the Company’s Class B Common Stock were converted into the same amount of shares of the Company’s Class A Common Stock.

Accumulated Other Comprehensive Income

The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2022:

(In millions)	Net Cash Flow Hedge Gain (Loss)		Amounts Included in Net Periodic Benefit Cost			Translation Adjustments			Total
Balance at June 30, 2021	$	(2)	$	(179)		$	(289)		$	(470)
OCI before reclassifications	12		1		(1)	(182)		(2)	(169)
Amounts reclassified to Net earnings	4		9			—			13
Net current-period OCI	16		10			(182)			(156)
Balance at March 31, 2022	$	14	$	(169)		$	(471)		$	(626)

(1)Consists of foreign currency translation losses.

(2)See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and nine months ended March 31, 2022 and 2021:

	Amount Reclassified from AOCI								Affected Line Item in Consolidated Statements of Earnings
	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Gain (Loss) on Cash Flow Hedges
Foreign currency forward contracts	$	3	$	(7)	$	(5)	$	(11)	Net sales
Interest rate-related derivatives	—		(1)		(1)		(2)		Interest expense
	3		(8)		(6)		(13)
Benefit for deferred taxes	—		2		2		3		Provision for income taxes
	3		(6)		(4)		(10)		Net earnings
Retirement Plan and Other Retiree Benefit Adjustments
Amortization of prior service cost	—		—		1		—		Other components of net periodic benefit cost (1)
Amortization of actuarial loss	(4)		(6)		(13)		(18)		Other components of net periodic benefit cost (1)
Settlements	—		(1)		—		(1)		Other components of net periodic benefit cost (1)
	(4)		(7)		(12)		(19)
Benefit for deferred taxes	1		3		3		5		Provision for income taxes
	(3)		(4)		(9)		(14)		Net earnings
Total reclassification adjustments, net	$	—	$	(10)	$	(13)	$	(24)	Net earnings

(1)See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

XML

STATEMENT OF CASH FLOWS

9 Months Ended

Mar. 31, 2022

Supplemental Cash Flow Elements [Abstract]

STATEMENT OF CASH FLOWS

STATEMENT OF CASH FLOWS

Supplemental cash flow information for the nine months ended March 31, 2022 and 2021 is as follows:

(In millions)	2022		2021
Cash:
Cash paid during the period for interest	$	110	$	108
Cash paid during the period for income taxes	$	626	$	435
Non-cash investing and financing activities:
Property, plant and equipment accrued but unpaid	$	110	$	68
Financing lease modifications	$	(13)	$	—
Right-of-use assets obtained in exchange for new/modified operating lease liabilities	$	179	$	167

XML

SEGMENT DATA AND RELATED INFORMATION

9 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

SEGMENT DATA AND RELATED INFORMATION

SEGMENT DATA AND RELATED INFORMATION

Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and operating income (loss) before charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.

The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2021.

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	2,395	$	2,259	$	8,003	$	7,113
Makeup	1,114		1,018		3,674		3,243
Fragrance	579		454		1,987		1,478
Hair Care	147		128		475		418
Other	11		15		40		37
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	667	$	804	$	2,466	$	2,453
Makeup	7		(72)		228		(115)
Fragrance	105		47		446		248
Hair Care	(18)		(17)		(8)		(10)
Other	—		(1)		3		(1)
	761		761		3,135		2,575
Reconciliation:
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Interest expense	(41)		(43)		(125)		(131)
Interest income and investment income, net	5		9		19		40
Other components of net periodic benefit cost	1		(2)		2		(12)
Other income	—		—		1		—
Earnings before income taxes	$	703	$	580	$	2,988	$	2,281
GEOGRAPHIC DATA(1)
Net sales:
The Americas	$	1,053	$	916	$	3,547	$	2,837
Europe, the Middle East & Africa	1,990		1,706		6,201		5,276
Asia/Pacific	1,203		1,252		4,431		4,176
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Operating income:
The Americas	$	408	$	155	$	1,044	$	256
Europe, the Middle East & Africa	281		361		1,366		1,429
Asia/Pacific	72		245		725		890
	761		761		3,135		2,575
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Operating income	$	738	$	616	$	3,091	$	2,384

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation.

Management Estimates

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $13 million and $(143) million, net of tax, during the three months ended March 31, 2022 and 2021, respectively, and $(182) million and $175 million, net of tax, during the nine months ended March 31, 2022 and 2021, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $3 million and $(3) million during the three months ended March 31, 2022 and March 31, 2021, respectively, and $(15) million and $(5) million during the nine months ended March 31, 2022 and 2021, respectively.

Concentration of Credit Risk

Concentration of Credit RiskThe Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Assets (Useful Life)
Land	$	56	$	55
Buildings and improvements (10 to 40 years)	496		256
Machinery and equipment (3 to 10 years)	992		920
Computer hardware and software (4 to 10 years)	1,428		1,303
Furniture and fixtures (5 to 10 years)	129		125
Leasehold improvements	2,307		2,312
Construction in progress	589		647
	5,997		5,618
Less accumulated depreciation and amortization	(3,504)		(3,338)
	$	2,493	$	2,280

Depreciation and amortization of property, plant and equipment was $140 million and $129 million during the three months ended March 31, 2022 and 2021, respectively, and $406 million and $380 million during the nine months ended March 31, 2022 and 2021, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

Income Taxes

Income Taxes

The effective rate for income taxes for the three and nine months ended March 31, 2022 and 2021 are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
	2022		2021		2022		2021
Effective rate for income taxes	18.5	%	21.0	%	21.1	%	18.5	%
Basis-point change from the prior-year period	(250)				260

The effective tax rate for the three and nine months ended March 31, 2021 included the retroactive impact relating to fiscal 2020 and 2019 of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. The impact of the final issuance of GILTI tax regulations with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second and third quarters of fiscal 2021 and resulted in reductions of 30 basis points and 220 basis points to the effective tax rates for the three and nine months ended March 31, 2021, respectively.

For the three months ended March 31, 2022, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations, partially offset by a decrease in excess tax benefits associated with stock-based compensation arrangements.

For the nine months ended March 31, 2022, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company’s foreign operations, which includes the retroactive impact of the final GILTI tax regulations recognized in the prior period. Also contributing to the increase was a decrease in excess tax benefits associated with stock-based compensation arrangements.

As of March 31, 2022 and June 30, 2021, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $63 million and $62 million, respectively. The total amount of unrecognized tax benefits at March 31, 2022 that, if recognized, would affect the effective tax rate was $53 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2022 in the accompanying consolidated statements of earnings was $1 million and $5 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at March 31, 2022 and June 30, 2021, was $15 million and $14 million, respectively. On the basis of the information available as of March 31, 2022, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

During the fiscal 2022 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2020 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and nine months ended March 31, 2022.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter.

Impact on consolidated financial statements – On July 1, 2021, the Company adopted this standard and recorded a cumulative adjustment of $121 million as an increase to its fiscal 2022 opening retained earnings balance to derecognize a deferred tax liability related to a previously held equity method investment that became a foreign subsidiary.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848 “ASC 848”)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform.

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company currently has an implementation team in place that is performing a comprehensive evaluation and assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company does not expect any qualifying contract modifications related to reference rate reform and therefore does not expect that the optional guidance in ASC 848 will need to be applied through December 31, 2022. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2022.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Schedule of inventory and promotional merchandise

Inventory and promotional merchandise consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Raw materials	$	778	$	674
Work in process	336		330
Finished goods	1,454		1,213
Promotional merchandise	262		288
	$	2,830	$	2,505

Schedule of property, plant and equipment

Property, plant and equipment consists of the following:

(In millions)	March 31, 2022		June 30, 2021
Assets (Useful Life)
Land	$	56	$	55
Buildings and improvements (10 to 40 years)	496		256
Machinery and equipment (3 to 10 years)	992		920
Computer hardware and software (4 to 10 years)	1,428		1,303
Furniture and fixtures (5 to 10 years)	129		125
Leasehold improvements	2,307		2,312
Construction in progress	589		647
	5,997		5,618
Less accumulated depreciation and amortization	(3,504)		(3,338)
	$	2,493	$	2,280

Schedule of effective rate for income taxes

The effective rate for income taxes for the three and nine months ended March 31, 2022 and 2021 are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
	2022		2021		2022		2021
Effective rate for income taxes	18.5	%	21.0	%	21.1	%	18.5	%
Basis-point change from the prior-year period	(250)				260

Schedule of other accrued liabilities

Other accrued liabilities consist of the following:

(In millions)	March 31, 2022		June 30, 2021
Advertising, merchandising and sampling	$	322	$	294
Employee compensation	582		670
Deferred revenue	313		322
Payroll and other non-income taxes	321		359
Accrued income taxes	299		237
Other	1,450		1,313
	$	3,287	$	3,195

XML

ACQUISITION OF BUSINESSES (Tables)

9 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Summary of total consideration transferred

A summary of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2022, is as follows:

(In millions)	March 31, 2022
Cash paid	$	1,095
Fair value of DECIEM stock options liability	104
Fair value of net Put (Call) Option	233
Total consideration for the acquired ownership interest (approximately 47.9%)	1,432
Fair value of previously held equity method investment (approximately 30.5%)	913
Fair value of redeemable noncontrolling interest (approximately 21.6%)	647
Total consideration transferred (100%)	$	2,992

Schedule of key assumptions used for acquisition date fair value

The acquisition-date fair values of the DECIEM stock options and the net Put (Call) Option were calculated by incorporating significant assumptions including the starting equity value, revenue growth rates and EBITDA and the following key assumptions into the Monte Carlo Method:

	May 18, 2021
Risk-free rate	0.50%
Term to mid of last twelve-month period	2.54 years
Operating leverage adjustment	0.45
Net sales discount rate	3.30%
EBITDA discount rate	6.80%
EBITDA volatility	38.30%
Net sales volatility	17.20%

The fair value of the stock options were calculated using the following key assumptions into the Monte Carlo Method:

	March 31, 2022	June 30, 2021	May 18, 2021
Risk-free rate	1.80%	0.50%	0.50%
Term to mid of last twelve-month period	1.67 years	2.42 years	2.54 years
Operating leverage adjustment	0.45	0.45	0.45
Net sales discount rate	5.00%	3.40%	3.30%
EBITDA discount rate	8.90%	6.90%	6.80%
EBITDA volatility	34.00%	37.70%	38.30%
Net sales volatility	15.30%	17.00%	17.20%

Rollforward of final allocation of total consideration

The final allocation of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2022, has been recorded as follows:

(In millions)	March 31, 2022
Cash	$	35
Accounts receivable	64
Inventory	190
Other current assets	33
Property, plant and equipment	40
Operating lease right-of-use assets	40
Intangible assets	1,917
Goodwill	1,296
Deferred income taxes	8
Total assets acquired	3,623
Accounts payable	21
Operating lease liabilities	8
Other accrued liabilities	78
Deferred income taxes	479
Long-term operating lease liabilities	45
Total liabilities assumed	631
Total consideration transferred	$	2,992

XML

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

9 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill by product category and related change in the carrying amount

The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2021
Goodwill	$	1,786	$	1,214	$	262	$	355	$	3,617
Accumulated impairments	(141)		(830)		(30)		—		(1,001)
	1,645		384		232		355		2,616
Goodwill measurement period adjustment	13		—		—		—		13
Translation adjustments, goodwill	(34)		—		(6)		—		(40)
Translation adjustments, accumulated impairments	2		—		—		—		2
	(19)		—		(6)		—		(25)
Balance as of March 31, 2022
Goodwill	1,765		1,214		256		355		3,590
Accumulated impairments	(139)		(830)		(30)		—		(999)
	$	1,626	$	384	$	226	$	355	$	2,591

Schedule of other intangible assets, by type

Other intangible assets consist of the following:

	March 31, 2022						June 30, 2021
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	2,208	$	660	$	1,548	$	2,273	$	544	$	1,729
License agreements	43		43		—		43		43		—
	$	2,251	$	703	1,548		$	2,316	$	587	1,729
Non-amortizable intangible assets:
Trademarks and other					2,090						2,366
Total intangible assets					$	3,638					$	4,095

Estimated aggregate amortization expense for the remainder of the current fiscal year and the next four years

The estimated aggregate amortization expense for the remainder of fiscal 2022 and for each of the next four fiscal years is as follows:

	Fiscal
(In millions)	2022		2023		2024		2025		2026
Estimated aggregate amortization expense	$	39	$	155	$	154	$	154	$	154

Summary of impairment charges and carrying value of intangible assets

A summary of the impairment charges for the three and nine months ended March 31, 2022 and the remaining trademark and goodwill carrying values as of March 31, 2022, for each reporting unit, are as follows:

(In millions)		Impairment Charge				Carrying Value
Reporting Unit:	Geographic Region	Trademarks		Goodwill		Trademarks		Goodwill
GLAMGLOW	The Americas	$	11	$	—	$	—	$	—
Dr. Jart+	Asia/Pacific	205		—		486		332
Total		$	216	$	—	$	486	$	332

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES (Tables)

9 Months Ended

Mar. 31, 2022

Restructuring and Related Activities [Abstract]

Schedule of aggregate restructuring and other activities

Charges associated with the Post-COVID Business Acceleration Program for the three and nine months ended March 31, 2022 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Three months ended March 31, 2022	$	1	$	—	$	17	$	1	$	19
Nine months ended March 31, 2022	$	3	$	(2)	$	24	$	6	$	31

Schedule of total cumulative charges expected to be incurred associated with restructuring and other activities

Total PCBA Program cumulative charges (adjustments) approved by the Company through March 31, 2022 were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Cumulative through June 30, 2021	$	42	$	(6)	$	257	$	21	$	314
Nine months ended March 31, 2022	(19)		9		5		2		(3)
Cumulative through March 31, 2022	$	23	$	3	$	262	$	23	$	311

The following presents the restructuring initiatives approved from April 1, 2022 to April 26, 2022 by major cost type:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Approval Period
April 1, 2022 - April 26, 2022	$	—	$	—	$	50	$	—	$	50

Schedule of total cumulative charges by type approved associated with restructuring initiatives

Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through March 31, 2022 by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2021	$	132	$	108	$	13	$	4	$	257
Nine months ended March 31, 2022	3		4		(1)		(1)		5
Cumulative through March 31, 2022	$	135	$	112	$	12	$	3	$	262

Included in the above table, cumulative restructuring initiatives approved by the Company from April 1, 2022 to April 26, 2022 were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Approval Period
April 1, 2022 - April 26, 2022	$	—	$	34	$	16	$	—	$	50

Schedule of total cumulative charges recorded associated with restructuring and other activities

Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments)
Cumulative through June 30, 2021	$	14	$	2	$	201	$	4	$	221
Nine months ended March 31, 2022	3		(2)		24		6		31
Cumulative through March 31, 2022	$	17	$	—	$	225	$	10	$	252

Schedule of total cumulative charges by type recorded associated with restructuring and other activities

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2021	$	119	$	75	$	6	$	1	$	201
Nine months ended March 31, 2022	5		7		11		1		24
Cumulative through March 31, 2022	$	124	$	82	$	17	$	2	$	225

Schedule of changes in accrued restructuring charges

Changes in accrued restructuring charges for the nine months ended March 31, 2022 relating to the PCBA Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2021	$	101	$	—	$	—	$	—	$	101
Charges	5		7		11		1		24
Cash payments	(39)		—		(11)		(1)		(51)
Non-cash asset write-offs	—		(7)		—		—		(7)
Translation and other adjustments	(7)		—		—		—		(7)
Balance at March 31, 2022	$	60	$	—	$	—	$	—	$	60

XML

DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair values of the derivative financial instruments included in the consolidated balance sheets

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value (1)					Fair Value (1)
(In millions)	Balance Sheet Location	March 31, 2022		June 30, 2021		Balance Sheet Location	March 31, 2022		June 30, 2021
Derivatives Designated as Hedging Instruments:
Foreign currency cash flow hedges	Prepaid expenses and other current assets	$	21	$	12	Other accrued liabilities	$	22	$	20
Net investment hedges	Prepaid expenses and other current assets	15		34		Other accrued liabilities	—		—
Interest rate-related derivatives	Prepaid expenses and other current assets	10		15		Other accrued liabilities	71		—
Total Derivatives Designated as Hedging Instruments		46		61			93		20
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Prepaid expenses and other current assets	23		6		Other accrued liabilities	25		36
Total derivatives		$	69	$	67		$	118	$	56

(1)See Note 6 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

Schedule of gains and losses related to derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Earnings	Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
	Three Months Ended March 31					Three Months Ended March 31
(In millions)	2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(2)	$	22	Net sales	$	3	$	(7)
Interest rate-related derivatives	10		11		Interest expense	—		(1)
	8		33			3		(8)
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	17		125			—		—
Total derivatives	$	25	$	158		$	3	$	(8)

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the three months ended March 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $3 million and $5 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Location of Gain (Loss) Reclassified from AOCI into Earnings	Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
	Nine Months Ended March 31					Nine Months Ended March 31
(In millions)	2022		2021			2022		2021
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	5	$	(43)	Net sales	$	(5)	$	(11)
Interest rate-related derivatives	10		14		Interest expense	(1)		(2)
	15		(29)			(6)		(13)
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	87		(17)			—		—
Total derivatives	$	102	$	(46)		$	(6)	$	(13)

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the nine months ended March 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $8 million and $15 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

		Amount of Gain (Loss) Recognized in Earnings on Derivatives (1)
	Location of Gain (Loss) Recognized in Earnings on Derivatives
		Three Months Ended March 31				Nine Months Ended March 31
(In millions)		2022		2021		2022		2021
Derivatives in Fair Value Hedging Relationships:
Interest rate swap contracts	Interest expense	$	(69)	$	(18)	$	(85)	$	(23)

(1)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Schedule of cumulative amount of fair value hedging adjustments for designated and qualifying hedged items

Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions)
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included	Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability
	March 31, 2022		March 31, 2022
Current debt	$	251	$	1
Long-term debt	921		(71)
Total debt	$	1,172	$	(70)

Schedule of effects of fair value and cash flow hedging relationships for designated and qualified hedging instruments

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

	Three Months Ended March 31
	2022				2021
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	4,245	$	41	$	3,864	$	43
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		69		Not applicable		18
Derivatives designated as hedging instruments	Not applicable		(69)		Not applicable		(18)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		—		Not applicable		(1)
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	3		Not applicable		(7)		Not applicable

	Nine Months Ended March 31
	2022				2021
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	14,176	$	125	$	12,279	$	131
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		85		Not applicable		23
Derivatives designated as hedging instruments	Not applicable		(85)		Not applicable		(23)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		(1)		Not applicable		(2)
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(5)		Not applicable		(11)		Not applicable

Schedule of gains and losses related to derivative financial instruments not designated as hedging instruments

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

		Amount of Gain (Loss) Recognized in Earnings on Derivatives
	Location of Gain (Loss) Recognized in Earnings on Derivatives	Three Months Ended March 31				Nine Months Ended March 31
(In millions)		2022		2021		2022		2021
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Selling, general and administrative	$	17	$	(97)	$	(32)	$	(34)

XML

FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities measured at fair value on a recurring basis

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	1,019	$	—	$	—	$	1,019
Foreign currency forward contracts	—		59		—		59
Interest rate-related derivatives	—		10		—		10
Total	$	1,019	$	69	$	—	$	1,088
Liabilities:
Foreign currency forward contracts	$	—	$	47	$	—	$	47
Interest rate-related derivatives	—		71		—		71
DECIEM stock options	—		—		74		74
Total	$	—	$	118	$	74	$	192

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,079	$	—	$	—	$	2,079
Foreign currency forward contracts	—		52		—		52
Interest rate-related derivatives	—		15		—		15
Total	$	2,079	$	67	$	—	$	2,146
Liabilities:
Foreign currency forward contracts	$	—	$	56	$	—	$	56
DECIEM stock options	—		—		141		141
Total	$	—	$	56	$	141	$	197

Schedule of estimated fair values of financial instruments

The estimated fair values of the Company’s financial instruments are as follows:

	March 31, 2022				June 30, 2021
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	3,836	$	3,836	$	4,958	$	4,958
Current and long-term debt	5,457		5,607		5,569		6,262
DECIEM stock options	74		74		141		141
Derivatives
Foreign currency forward contracts – asset (liability), net	12		12		(4)		(4)
Interest rate-related derivatives – asset (liability), net	(61)		(61)		15		15

Impairment charges measured at fair value on a nonrecurring basis, classified as Level 3

The following table presents the Company’s impairment charges for the nine months ended March 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value(1)
Other intangible assets, net (trademarks)
GLAMGLOW	$	11	March 31, 2022	$	—
Dr. Jart+	205		February 28, 2022	486
Total	216			486
Total	$	216		$	486

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the nine months ended March 31, 2021 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value(1)
Goodwill
GLAMGLOW	$	54	November 30, 2020	$	—
BECCA(2)	13		February 28, 2021	—
Total	67			—
Other intangible assets, net (trademark and customer lists)
GLAMGLOW	27		November 30, 2020	36
BECCA(2)	34		February 28, 2021	—
Total	61			36
Long-lived assets	33		March 31, 2021	35
Total	$	161		$	71

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

(2)See Note 4 – Charges Associated with Restructuring and Other Activities for further information relating to goodwill and other intangible asset impairment charges recorded in connection with the exit of the global distribution of BECCA products.

Changes in DECEIM stock option liability

Changes in the DECIEM stock option liability for the nine months ended March 31, 2022 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions)	Fair Value
DECIEM stock option liability as of June 30, 2021	$	141
Changes in fair value, net of foreign currency remeasurements(1)	(58)
Translation adjustments and other, net	(9)
DECIEM stock option liability as of March 31, 2022	$	74

(1)Amount includes expense attributable to graded vesting of stock options which is not material for the nine months ended March 31, 2022.

XML

REVENUE RECOGNITION (Tables)

9 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Schedule of changes in allowance for credit losses

Changes in the allowance for credit losses are as follows:

(In millions)	March 31, 2022
Balance at June 30, 2021	$	20
Adjustment for expected credit losses	(2)
Write-offs, net & other	(1)
Balance at March 31, 2022	$	17

Schedule of significant changes in deferred revenue

Changes in deferred revenue during the period are as follows:

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Deferred revenue, beginning of period	$	421	$	420	$	371	$	279
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(40)		(25)		(288)		(198)
Revenue deferred (released) during the period	(13)		(30)		285		278
Other	(4)		(4)		(4)		2
Deferred revenue, end of period	$	364	$	361	$	364	$	361

XML

PENSION AND POST-RETIREMENT BENEFIT PLANS (Tables)

9 Months Ended

Mar. 31, 2022

Retirement Benefits [Abstract]

Schedule of components of net periodic benefit cost for pension and other post-retirement benefit plans

The components of net periodic benefit cost for the three months ended March 31, 2022 and 2021 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2022		2021		2022		2021		2022		2021
Service cost	$	12	$	12	$	8	$	9	$	1	$	2
Interest cost	8		8		3		2		1		1
Expected return on plan assets	(14)		(14)		(4)		(4)		—		(1)
Amortization of:
Actuarial loss	4		5		—		1		—		—
Prior service cost	—		—		—		—		—		—
Settlements	—		—		—		1		—		—
Special termination benefits	—		—		1		1		—		—
Net periodic benefit cost	$	10	$	11	$	8	$	10	$	2	$	2

The components of net periodic benefit cost for the nine months ended March 31, 2022 and 2021 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2022		2021		2022		2021		2022		2021
Service cost	$	35	$	34	$	24	$	27	$	2	$	2
Interest cost	23		23		8		7		4		4
Expected return on plan assets	(41)		(40)		(11)		(10)		(1)		(1)
Amortization of:
Actuarial loss	11		15		1		3		1		—
Prior service cost	—		—		(1)		—		—		—
Settlements	—		—		—		1		—		—
Special termination benefits	—		—		4		10		—		—
Net periodic benefit cost	$	28	$	32	$	25	$	38	$	6	$	5

Schedule of amounts recognized in the consolidated balance sheets related to the Company's pension and post-retirement benefit plans

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions)	March 31, 2022		June 30, 2021
Other assets	$	142	$	162
Other accrued liabilities	(28)		(28)
Other noncurrent liabilities	(426)		(432)
Funded status	(312)		(298)
Accumulated other comprehensive loss	229		242
Net amount recognized	$	(83)	$	(56)

XML

STOCK PROGRAMS (Tables)

9 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Schedule of key assumptions used for acquisition date fair value

The acquisition-date fair values of the DECIEM stock options and the net Put (Call) Option were calculated by incorporating significant assumptions including the starting equity value, revenue growth rates and EBITDA and the following key assumptions into the Monte Carlo Method:

	May 18, 2021
Risk-free rate	0.50%
Term to mid of last twelve-month period	2.54 years
Operating leverage adjustment	0.45
Net sales discount rate	3.30%
EBITDA discount rate	6.80%
EBITDA volatility	38.30%
Net sales volatility	17.20%

The fair value of the stock options were calculated using the following key assumptions into the Monte Carlo Method:

	March 31, 2022	June 30, 2021	May 18, 2021
Risk-free rate	1.80%	0.50%	0.50%
Term to mid of last twelve-month period	1.67 years	2.42 years	2.54 years
Operating leverage adjustment	0.45	0.45	0.45
Net sales discount rate	5.00%	3.40%	3.30%
EBITDA discount rate	8.90%	6.90%	6.80%
EBITDA volatility	34.00%	37.70%	38.30%
Net sales volatility	15.30%	17.00%	17.20%

XML

NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE (Tables)

9 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schedule of reconciliation between the numerator and denominator of the basic and diluted EPS computations

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

	Three Months Ended March 31				Nine Months Ended March 31
(In millions, except per share data)	2022		2021		2022		2021
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$	558	$	456	$	2,338	$	1,852
Denominator:
Weighted-average common shares outstanding – Basic	359.2		363.6		360.7		362.9
Effect of dilutive stock options	3.5		4.1		3.9		3.9
Effect of PSUs	0.2		0.2		0.2		0.2
Effect of RSUs	0.7		1.1		1.0		1.1
Weighted-average common shares outstanding – Diluted	363.6		369.0		365.8		368.1
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic	$	1.55	$	1.25	$	6.48	$	5.10
Diluted	$	1.53	$	1.24	$	6.39	$	5.03

Schedule of antidilutive securities excluded from computation of earnings per share

The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows:

	Three Months Ended March 31		Nine Months Ended March 31
(In millions)	2022	2021	2022	2021
Stock options	1.0	—	0.8	0.9
RSUs and PSUs	—	—	0.1	0.1

XML

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST (Tables)

9 Months Ended

Mar. 31, 2022

Equity [Abstract]

Schedule of equity

Total Stockholders’ Equity – The Estée Lauder Companies Inc.

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Common stock, beginning of the period	$	6	$	6	$	6	$	6
Stock-based compensation	—		—		—		—
Common stock, end of the period	6		6		6		6
Paid-in capital, beginning of the period	5,605		5,068		5,335		4,790
Common stock dividends	2		1		3		2
Stock-based compensation	139		162		408		439
Paid-in capital, end of the period	5,746		5,231		5,746		5,231
Retained earnings, beginning of the period	13,735		11,159		12,244		10,134
Common stock dividends	(217)		(195)		(627)		(563)
Net earnings attributable to The Estée Lauder Companies Inc.	558		456		2,338		1,852
Cumulative effect of adoption of new accounting standards	—		—		121		(3)
Retained earnings, end of the period	14,076		11,420		14,076		11,420
Accumulated other comprehensive loss, beginning of the period	(646)		(383)		(470)		(665)
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc.	20		(104)		(156)		178
Accumulated other comprehensive loss, end of the period	(626)		(487)		(626)		(487)
Treasury stock, beginning of the period	(12,482)		(10,429)		(11,058)		(10,330)
Acquisition of treasury stock	(568)		(212)		(1,850)		(212)
Stock-based compensation	(2)		(1)		(144)		(100)
Treasury stock, end of the period	(13,052)		(10,642)		(13,052)		(10,642)
Total stockholders’ equity – The Estée Lauder Companies Inc.	6,150		5,528		6,150		5,528
Noncontrolling interests, beginning of the period	34		35		34		27
Net earnings attributable to noncontrolling interests	3		2		8		8
Distribution to noncontrolling interest holders	—		(6)		—		(6)
Translation adjustments and other, net	(1)		(1)		(6)		1
Noncontrolling interests, end of the period	36		30		36		30
Total equity	$	6,186	$	5,558	$	6,186	$	5,558
Redeemable noncontrolling interest, beginning of the period	$	840	$	—	$	857	$	—
Net earnings attributable to redeemable noncontrolling interest	12		—		12		—
Translation adjustments	14		—		(3)		—
Adjustment of redeemable noncontrolling interest to redemption value	(1)		—		(1)		—
Redeemable noncontrolling interest, end of the period	$	865	$	—	$	865	$	—
Cash dividends declared per common share	$	.60	$	.53	$	1.73	$	1.54

Summary of cash dividends declared per share on the Company's Class A and Class B Common Stock

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2022:

Date Declared	Record Date	Payable Date	Amount per Share
August 18, 2021	August 31, 2021	September 15, 2021	$	.53
November 1, 2021	November 30, 2021	December 15, 2021	$	.60
February 2, 2022	February 28, 2022	March 15, 2022	$	.60

Schedule of components of AOCI, net of tax

The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2022:

(In millions)	Net Cash Flow Hedge Gain (Loss)		Amounts Included in Net Periodic Benefit Cost			Translation Adjustments			Total
Balance at June 30, 2021	$	(2)	$	(179)		$	(289)		$	(470)
OCI before reclassifications	12		1		(1)	(182)		(2)	(169)
Amounts reclassified to Net earnings	4		9			—			13
Net current-period OCI	16		10			(182)			(156)
Balance at March 31, 2022	$	14	$	(169)		$	(471)		$	(626)

(1)Consists of foreign currency translation losses.

(2)See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

Schedule of effects of reclassification adjustments from AOCI into net earnings

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and nine months ended March 31, 2022 and 2021:

	Amount Reclassified from AOCI								Affected Line Item in Consolidated Statements of Earnings
	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
Gain (Loss) on Cash Flow Hedges
Foreign currency forward contracts	$	3	$	(7)	$	(5)	$	(11)	Net sales
Interest rate-related derivatives	—		(1)		(1)		(2)		Interest expense
	3		(8)		(6)		(13)
Benefit for deferred taxes	—		2		2		3		Provision for income taxes
	3		(6)		(4)		(10)		Net earnings
Retirement Plan and Other Retiree Benefit Adjustments
Amortization of prior service cost	—		—		1		—		Other components of net periodic benefit cost (1)
Amortization of actuarial loss	(4)		(6)		(13)		(18)		Other components of net periodic benefit cost (1)
Settlements	—		(1)		—		(1)		Other components of net periodic benefit cost (1)
	(4)		(7)		(12)		(19)
Benefit for deferred taxes	1		3		3		5		Provision for income taxes
	(3)		(4)		(9)		(14)		Net earnings
Total reclassification adjustments, net	$	—	$	(10)	$	(13)	$	(24)	Net earnings

(1)See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

XML

STATEMENT OF CASH FLOWS (Tables)

9 Months Ended

Mar. 31, 2022

Supplemental Cash Flow Elements [Abstract]

Supplemental cash flow information

Supplemental cash flow information for the nine months ended March 31, 2022 and 2021 is as follows:

(In millions)	2022		2021
Cash:
Cash paid during the period for interest	$	110	$	108
Cash paid during the period for income taxes	$	626	$	435
Non-cash investing and financing activities:
Property, plant and equipment accrued but unpaid	$	110	$	68
Financing lease modifications	$	(13)	$	—
Right-of-use assets obtained in exchange for new/modified operating lease liabilities	$	179	$	167

XML

SEGMENT DATA AND RELATED INFORMATION (Tables)

9 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Schedule of segment data and related information

	Three Months Ended March 31				Nine Months Ended March 31
(In millions)	2022		2021		2022		2021
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	2,395	$	2,259	$	8,003	$	7,113
Makeup	1,114		1,018		3,674		3,243
Fragrance	579		454		1,987		1,478
Hair Care	147		128		475		418
Other	11		15		40		37
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	667	$	804	$	2,466	$	2,453
Makeup	7		(72)		228		(115)
Fragrance	105		47		446		248
Hair Care	(18)		(17)		(8)		(10)
Other	—		(1)		3		(1)
	761		761		3,135		2,575
Reconciliation:
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Interest expense	(41)		(43)		(125)		(131)
Interest income and investment income, net	5		9		19		40
Other components of net periodic benefit cost	1		(2)		2		(12)
Other income	—		—		1		—
Earnings before income taxes	$	703	$	580	$	2,988	$	2,281
GEOGRAPHIC DATA(1)
Net sales:
The Americas	$	1,053	$	916	$	3,547	$	2,837
Europe, the Middle East & Africa	1,990		1,706		6,201		5,276
Asia/Pacific	1,203		1,252		4,431		4,176
	4,246		3,874		14,179		12,289
Returns associated with restructuring and other activities	(1)		(10)		(3)		(10)
Net sales	$	4,245	$	3,864	$	14,176	$	12,279
Operating income:
The Americas	$	408	$	155	$	1,044	$	256
Europe, the Middle East & Africa	281		361		1,366		1,429
Asia/Pacific	72		245		725		890
	761		761		3,135		2,575
Charges associated with restructuring and other activities	(23)		(145)		(44)		(191)
Operating income	$	738	$	616	$	3,091	$	2,384

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Translation and Transactions (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Currency Translation and Transactions
Unrealized translation gains (losses), net of tax	$ 13	$ (143)	$ (182)	$ 175
Net exchange gains (losses) on foreign currency transactions	$ 3	$ (3)	$ (15)	$ (5)

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Concentration Risk [Line Items]
Net sales	$ 4,245	$ 3,864	$ 14,176	$ 12,279
Accounts receivable, net	2,209		2,209		$ 1,702
Largest Customer | Revenue from Contract with Customer Benchmark | Customer Concentration Risk
Concentration Risk [Line Items]
Net sales	$ 740	$ 690	$ 1,792	$ 1,898
Concentration risk (as a percent)	17.00%	18.00%	13.00%	15.00%
Largest Customer | Accounts Receivable | Customer Concentration Risk
Concentration Risk [Line Items]
Concentration risk (as a percent)			20.00%		10.00%
Accounts receivable, net	$ 457		$ 457		$ 179

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventory and Promotional Merchandise (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Accounting Policies [Abstract]
Raw materials	$ 778	$ 674
Work in process	336	330
Finished goods	1,454	1,213
Promotional merchandise	262	288
Inventory and promotional merchandise	$ 2,830	$ 2,505

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Property, Plant and Equipment
Property, plant and equipment, gross	$ 5,997		$ 5,997		$ 5,618
Less accumulated depreciation and amortization	(3,504)		(3,504)		(3,338)
Property, plant and equipment, net	2,493		2,493		2,280
Depreciation and amortization of property, plant and equipment	140	$ 129	406	$ 380
Land
Property, Plant and Equipment
Property, plant and equipment, gross	56		56		55
Buildings and improvements
Property, Plant and Equipment
Property, plant and equipment, gross	496		$ 496		256
Buildings and improvements | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Buildings and improvements | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			40 years
Machinery and equipment
Property, Plant and Equipment
Property, plant and equipment, gross	992		$ 992		920
Machinery and equipment | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			3 years
Machinery and equipment | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Computer hardware and software
Property, Plant and Equipment
Property, plant and equipment, gross	1,428		$ 1,428		1,303
Computer hardware and software | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			4 years
Computer hardware and software | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Furniture and fixtures
Property, Plant and Equipment
Property, plant and equipment, gross	129		$ 129		125
Furniture and fixtures | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			5 years
Furniture and fixtures | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Leasehold improvements
Property, Plant and Equipment
Property, plant and equipment, gross	2,307		$ 2,307		2,312
Construction in progress
Property, Plant and Equipment
Property, plant and equipment, gross	$ 589		$ 589		$ 647

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Leases (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2021	Mar. 31, 2021
Other Asset Impairment Charges
LEASES
Operating lease, impairment loss	$ 33	$ 33

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Income Tax Contingency [Line Items]
Effective rate for income taxes (as a percent)	18.50%	21.00%	21.10%	18.50%
Basis-point change from the prior-year period (as a percent)	(2.50%)		2.60%
Gross unrecognized tax benefits	$ 63		$ 63		$ 62
Total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate	53		53
Gross interest and penalty accrued	1		5
Total gross accrued interest and penalties related to unrecognized tax benefits	$ 15		$ 15		$ 14
Fiscal Year 2020 and 2019 | Internal Revenue Service (IRS)
Income Tax Contingency [Line Items]
Tax cuts and jobs act, change in enacted rate after application of GILTI (as a percent)		(0.30%)		(2.20%)

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Other Accrued Liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Accounting Policies [Abstract]
Advertising, merchandising and sampling	$ 322	$ 294
Employee compensation	582	670
Deferred revenue	313	322
Payroll and other non-income taxes	321	359
Accrued income taxes	299	237
Other	1,450	1,313
Other accrued liabilities	$ 3,287	$ 3,195

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Accrued Liabilities Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Income Tax Contingency [Line Items]
Other noncurrent liabilities	$ 1,758	$ 2,037
Other Noncurrent Liabilities
Income Tax Contingency [Line Items]
Deferred tax liabilities	$ 744	$ 849

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Changes in Accounting Policies (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment, increase to opening balance of retained earnings	$ 6,186		$ 6,091	$ 5,558
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment, increase to opening balance of retained earnings	$ 14,076	$ 13,735	12,244	$ 11,420	$ 11,159	$ 10,134
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment, increase to opening balance of retained earnings		$ 0	121		$ 0	$ (3)
Accounting Standards Update 2019-12 | Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative adjustment, increase to opening balance of retained earnings			$ 121

XML

ACQUISITION OF BUSINESSES - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2022	May 18, 2021	Jun. 30, 2021	May 17, 2021
Stock Options | DECIEM 2021 Stock Option Plan
Business Acquisition [Line Items]
Stock option liability	$ 74		$ 141
DECIEM
Business Acquisition [Line Items]
Equity method investments		$ 65
DECIEM
Business Acquisition [Line Items]
Cash consideration	1,095	$ 1,092
Fully diluted equity interest before acquisition (as a percent)				29.00%
Fully diluted equity interest following acquisition (as a percent)		76.00%
Undiluted equity interest before acquisition (as a percent)		30.50%
Undiluted equity interest after acquisition (as a percent)		78.00%
Fair value of previously held equity method investment	913
Gain on remeasurement of previously held equity method investment	848
Consideration transferred	$ 2,992
Fair value of previously held equity method investment (as a percent)	30.50%
Fair value of net Put (Call) Option	$ 233
DECIEM | Stock Options | DECIEM 2021 Stock Option Plan
Business Acquisition [Line Items]
Stock options, percent of total capital structure		4.00%
Fair value of stock options	295
Payments for vested share-based payment award	191
Stock option liability	$ 104
DECIEM | DECIEM
Business Acquisition [Line Items]
Noncontrolling interest ownership (as a percent)	21.60%	21.60%
Right to sell, period	3 years

XML

ACQUISITION OF BUSINESSES - Summary of Total Consideration Transferred (Details) - DECIEM - USD ($) $ in Millions	Mar. 31, 2022	May 18, 2021
Business Combination, Consideration Transferred [Abstract]
Cash paid	$ 1,095	$ 1,092
Fair value of DECIEM stock options liability	104
Fair value of net Put (Call) Option	233
Total consideration for the acquired ownership interest (approximately 47.9%)	1,432
Fair value of previously held equity method investment (approximately 30.5%)	913
Fair value of redeemable noncontrolling interest (approximately 21.6%)	647
Total consideration transferred (100%)	$ 2,992
Business Combination, Consideration Transferred, Percent [Abstract]
Total consideration for the acquired ownership interest (as a percent)		47.90%
Fair value of previously held equity method investment (as a percent)		30.50%
Total consideration transferred (as a percent)		100.00%
DECIEM
Business Combination, Consideration Transferred, Percent [Abstract]
Fair value of redeemable noncontrolling interest (as a percent)	21.60%	21.60%

XML

ACQUISITION OF BUSINESSES - Schedule of Fair Value Option-Pricing Assumptions (Details) - DECIEM - DECIEM 2021 Stock Option Plan - Stock Options	Mar. 31, 2022	Jun. 30, 2021	May 18, 2021
Business Acquisition [Line Items]
Risk-free rate (as a percent)	1.80%	0.50%	0.50%
Term to mid of last twelve-month period	1 year 8 months 1 day	2 years 5 months 1 day	2 years 6 months 14 days
Operating leverage adjustment	0.45	0.45	0.45
Net sales discount rate (as a percent)	5.00%	3.40%	3.30%
EBITDA discount rate (as a percent)	8.90%	6.90%	6.80%
EBITDA volatility (as a percent)	34.00%	37.70%	38.30%
Net sales volatility (as a percent)	15.30%	17.00%	17.20%

XML

ACQUISITION OF BUSINESSES - Preliminary Allocation of Total Consideration Transferred (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Business Acquisition [Line Items]
Goodwill	$ 2,591	$ 2,616
DECIEM
Business Acquisition [Line Items]
Cash	35
Accounts receivable	64
Inventory	190
Other current assets	33
Property, plant and equipment	40
Operating lease right-of-use assets	40
Intangible assets	1,917
Goodwill	1,296
Deferred income taxes	8
Total assets acquired	3,623
Accounts payable	21
Operating lease liabilities	8
Other accrued liabilities	78
Deferred income taxes	479
Long-term operating lease liabilities	45
Total liabilities assumed	631
Total consideration transferred	$ 2,992

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions	1 Months Ended		3 Months Ended		9 Months Ended
	May 31, 2021	Nov. 30, 2020	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Intangible assets
Goodwill impairment			$ 0	$ 0	$ 0	$ 54
Skin Care | The Americas | GLAMGLOW
Intangible assets
Impairment charges of indefinite-lived intangible assets					11
Goodwill impairment		$ 54			0
Goodwill, fair value				0		0
Trademarks and other
Intangible assets
Trademarks and other			$ 2,090		$ 2,090		$ 2,366
Trademarks and other | Too Faced
Intangible assets
Fair value in excess of carrying value			13.00%		13.00%
Increase in weighted average cost of capital resulting in impairment charge (as a percent)					1.00%
Trademarks and other | DECIEM
Intangible assets
Fair value in excess of carrying value			3.00%		3.00%
Increase in weighted average cost of capital resulting in impairment charge (as a percent)					0.50%
Trademarks and other | Dr. Jart+
Intangible assets
Weighted-average cost of capital used to estimate fair value (as a percent)					10.50%
Trademarks and other | Skin Care | The Americas | GLAMGLOW
Intangible assets
Impairment charges of indefinite-lived intangible assets		21	$ 11
Trademarks and other			$ 0	$ 36	$ 0	$ 36
Customer lists | Skin Care | The Americas | GLAMGLOW
Intangible assets
Impairment charges of finite-lived intangible assets		$ 6
DECIEM
Intangible assets
Goodwill measurement period adjustment	$ 1,296
DECIEM | Trademarks and other
Intangible assets
Indefinite-lived intangible assets acquired	1,216
DECIEM | Customer lists
Intangible assets
Finite-lived intangible assets acquired	$ 701
DECIEM | Customer lists | Minimum
Intangible assets
Useful life (in years)	7 years
DECIEM | Customer lists | Maximum
Intangible assets
Useful life (in years)	14 years

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Millions	9 Months Ended
	Mar. 31, 2022	Jun. 30, 2021
Changes in goodwill
Goodwill, gross, beginning balance	$ 3,617
Accumulated impairments	(999)	$ (1,001)
Goodwill, beginning balance	2,616
Goodwill measurement period adjustment	13
Translation adjustments, goodwill	(40)
Translation adjustments, accumulated impairments	2
Goodwill, period increase (decrease)	(25)
Goodwill, gross, ending balance	3,590
Goodwill, ending balance	2,591
Skin Care
Changes in goodwill
Goodwill, gross, beginning balance	1,786
Accumulated impairments	(139)	(141)
Goodwill, beginning balance	1,645
Goodwill measurement period adjustment	13
Translation adjustments, goodwill	(34)
Translation adjustments, accumulated impairments	2
Goodwill, period increase (decrease)	(19)
Goodwill, gross, ending balance	1,765
Goodwill, ending balance	1,626
Makeup
Changes in goodwill
Goodwill, gross, beginning balance	1,214
Accumulated impairments	(830)	(830)
Goodwill, beginning balance	384
Goodwill measurement period adjustment	0
Translation adjustments, goodwill	0
Translation adjustments, accumulated impairments	0
Goodwill, period increase (decrease)	0
Goodwill, gross, ending balance	1,214
Goodwill, ending balance	384
Fragrance
Changes in goodwill
Goodwill, gross, beginning balance	262
Accumulated impairments	(30)	(30)
Goodwill, beginning balance	232
Goodwill measurement period adjustment	0
Translation adjustments, goodwill	(6)
Translation adjustments, accumulated impairments	0
Goodwill, period increase (decrease)	(6)
Goodwill, gross, ending balance	256
Goodwill, ending balance	226
Hair Care
Changes in goodwill
Goodwill, gross, beginning balance	355
Accumulated impairments	0	$ 0
Goodwill, beginning balance	355
Goodwill measurement period adjustment	0
Translation adjustments, goodwill	0
Translation adjustments, accumulated impairments	0
Goodwill, period increase (decrease)	0
Goodwill, gross, ending balance	355
Goodwill, ending balance	$ 355

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Amortizable intangible assets:
Gross Carrying Value	$ 2,251		$ 2,251		$ 2,316
Accumulated Amortization	703		703		587
Total Net Book Value	1,548		1,548		1,729
Non-amortizable intangible assets:
Total intangible assets	3,638		3,638		4,095
Aggregate amortization expense for amortizable intangible assets	38	$ 25	122	$ 77
Estimated aggregate amortization expense
Estimated aggregate amortization expense for remainder of fiscal year 2022	39		39
Estimated aggregate amortization expense for remainder of fiscal year 2023	155		155
Estimated aggregate amortization expense for fiscal year 2024	154		154
Estimated aggregate amortization expense for fiscal year 2025	154		154
Estimated aggregate amortization expense for fiscal year 2026	154		154
Trademarks and other
Non-amortizable intangible assets:
Trademarks and other	2,090		2,090		2,366
Customer lists and other
Amortizable intangible assets:
Gross Carrying Value	2,208		2,208		2,273
Accumulated Amortization	660		660		544
Total Net Book Value	1,548		1,548		1,729
License agreements
Amortizable intangible assets:
Gross Carrying Value	43		43		43
Accumulated Amortization	43		43		43
Total Net Book Value	$ 0		$ 0		$ 0

XML

GOODWILL AND OTHER INTANGIBLE ASSETS - Impairment (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Nov. 30, 2020	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021	Jun. 30, 2021
Intangible assets
Impairment, goodwill		$ 0	$ 0	$ 0	$ 54
Carrying Value, Goodwill		2,591		2,591		$ 2,616
Skin Care
Intangible assets
Carrying Value, Goodwill		1,626		1,626		$ 1,645
GLAMGLOW | The Americas | Skin Care
Intangible assets
Impairment, trademarks				11
Impairment, goodwill	$ 54			0
Carrying Value, Trademarks		0		0
Carrying Value, Goodwill		0		0
Dr. Jart+ | Asia/Pacific | Skin Care
Intangible assets
Impairment, trademarks				205
Impairment, goodwill				0
Carrying Value, Trademarks		486		486
Carrying Value, Goodwill		332		332
Total | Skin Care
Intangible assets
Impairment, trademarks				216
Impairment, goodwill				0
Carrying Value, Trademarks		486		486
Carrying Value, Goodwill		$ 332		$ 332

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Charges Associated With Restructuring Activities (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Restructuring and Other Costs
Restructuring charges	$ 23	$ 145	$ 44	$ 191
PCBA Program
Restructuring and Other Costs
Restructuring charges	19		31
Sales Returns (included in Net Sales)
Restructuring and Other Costs
Restructuring charges	1	$ 10	3	$ 10
Sales Returns (included in Net Sales) | PCBA Program
Restructuring and Other Costs
Restructuring charges	1		3
Cost of Sales | PCBA Program
Restructuring and Other Costs
Restructuring charges	0		(2)
Restructuring Charges | PCBA Program
Restructuring and Other Costs
Restructuring charges	17		24
Other Charges | PCBA Program
Restructuring and Other Costs
Restructuring charges	$ 1		$ 6

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Narrative (Details) - PCBA Program $ in Millions		9 Months Ended	12 Months Ended
	Aug. 20, 2020 USD ($)	Mar. 31, 2022 position	Jun. 30, 2024 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	Apr. 26, 2022 USD ($)
Restructuring and Other Costs
Restructuring program, period	2 years
Subsequent Event
Restructuring and Other Costs
Restructuring and related costs, expected costs						$ 50
Forecast
Restructuring and Other Costs
Accrued restructuring charges expected to result in cash expenditures funded from cash provided by operations			$ 7	$ 30	$ 23
Minimum
Restructuring and Other Costs
Net reduction in global positions | position		2,000
Closure of freestanding stores (as a percent)	10.00%
Restructuring and related costs, expected costs	$ 400
Maximum
Restructuring and Other Costs
Net reduction in global positions | position		2,500
Closure of freestanding stores (as a percent)	15.00%
Restructuring and related costs, expected costs	$ 500

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Charges Expected To Be Incurred (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Apr. 26, 2022	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges		$ 22	$ 131	$ 41	$ 172
PCBA Program
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Cumulative through June 30, 2021	$ 311			314
Restructuring and other charges				(3)
Cumulative through March 31, 2022		311		311
PCBA Program | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	50
PCBA Program | Sales Returns (included in Net Sales)
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Cumulative through June 30, 2021	23			42
Restructuring and other charges				(19)
Cumulative through March 31, 2022		23		23
PCBA Program | Sales Returns (included in Net Sales) | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	0
PCBA Program | Cost of Sales
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Cumulative through June 30, 2021	3			(6)
Restructuring and other charges				9
Cumulative through March 31, 2022		3		3
PCBA Program | Cost of Sales | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	0
PCBA Program | Restructuring Charges
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Cumulative through June 30, 2021	262			257
Restructuring and other charges				5
Cumulative through March 31, 2022		262		262
PCBA Program | Restructuring Charges | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	50
PCBA Program | Restructuring Charges | Employee- Related Costs
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges				3
PCBA Program | Restructuring Charges | Employee- Related Costs | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	0
PCBA Program | Restructuring Charges | Asset- Related Costs
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges				4
PCBA Program | Restructuring Charges | Asset- Related Costs | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	34
PCBA Program | Restructuring Charges | Contract Terminations
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges				(1)
PCBA Program | Restructuring Charges | Contract Terminations | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	16
PCBA Program | Restructuring Charges | Other Exit Costs
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges				(1)
PCBA Program | Restructuring Charges | Other Exit Costs | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	0
PCBA Program | Other Charges
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Cumulative through June 30, 2021	23			21
Restructuring and other charges				2
Cumulative through March 31, 2022		$ 23		$ 23
PCBA Program | Other Charges | Subsequent Event
Restructuring And Other Charges Expected To Be Incurred [Roll Forward]
Restructuring and other charges	$ 0

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Approved Restructuring Activities by Major Cost Type (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Restructuring and related costs
Restructuring and other charges	$ 22	$ 131	$ 41	$ 172
PCBA Program
Restructuring and related costs
Restructuring and other charges			(3)
PCBA Program | Sales Returns (included in Net Sales)
Restructuring and related costs
Restructuring and other charges			(19)
PCBA Program | Cost of Sales
Restructuring and related costs
Restructuring and other charges			9
PCBA Program | Restructuring Charges
Restructuring and related costs
Cumulative through June 30, 2021			257
Restructuring and other charges			5
Cumulative through March 31, 2022	262		262
PCBA Program | Restructuring Charges | Employee- Related Costs
Restructuring and related costs
Cumulative through June 30, 2021			132
Restructuring and other charges			3
Cumulative through March 31, 2022	135		135
PCBA Program | Restructuring Charges | Asset- Related Costs
Restructuring and related costs
Cumulative through June 30, 2021			108
Restructuring and other charges			4
Cumulative through March 31, 2022	112		112
PCBA Program | Restructuring Charges | Contract Terminations
Restructuring and related costs
Cumulative through June 30, 2021			13
Restructuring and other charges			(1)
Cumulative through March 31, 2022	12		12
PCBA Program | Restructuring Charges | Other Exit Costs
Restructuring and related costs
Cumulative through June 30, 2021			4
Restructuring and other charges			(1)
Cumulative through March 31, 2022	$ 3		3
PCBA Program | Other Charges
Restructuring and related costs
Restructuring and other charges			$ 2

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Restructuring Charges by Major Cost Type (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Restructuring and related costs
Charges	$ 23	$ 145	$ 44	$ 191
Sales Returns (included in Net Sales)
Restructuring and related costs
Charges	1	$ 10	3	$ 10
PCBA Program
Restructuring and related costs
Cumulative through June 30, 2021			221
Charges	19		31
Cumulative through March 31, 2022	252		252
PCBA Program | Sales Returns (included in Net Sales)
Restructuring and related costs
Cumulative through June 30, 2021			14
Charges	1		3
Cumulative through March 31, 2022	17		17
PCBA Program | Cost of Sales
Restructuring and related costs
Cumulative through June 30, 2021			2
Charges	0		(2)
Cumulative through March 31, 2022	0		0
PCBA Program | Restructuring Charges
Restructuring and related costs
Cumulative through June 30, 2021			201
Charges	17		24
Cumulative through March 31, 2022	225		225
PCBA Program | Restructuring Charges | Employee- Related Costs
Restructuring and related costs
Cumulative through June 30, 2021			119
Charges			5
Cumulative through March 31, 2022	124		124
PCBA Program | Restructuring Charges | Asset- Related Costs
Restructuring and related costs
Cumulative through June 30, 2021			75
Charges			7
Cumulative through March 31, 2022	82		82
PCBA Program | Restructuring Charges | Contract Terminations
Restructuring and related costs
Cumulative through June 30, 2021			6
Charges			11
Cumulative through March 31, 2022	17		17
PCBA Program | Restructuring Charges | Other Exit Costs
Restructuring and related costs
Cumulative through June 30, 2021			1
Charges			1
Cumulative through March 31, 2022	2		2
PCBA Program | Other Charges
Restructuring and related costs
Cumulative through June 30, 2021			4
Charges	1		6
Cumulative through March 31, 2022	$ 10		$ 10

XML

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Accrued Restructuring Charges (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Restructuring and Other Costs
Charges	$ 23	$ 145	$ 44	$ 191
PCBA Program
Restructuring and Other Costs
Charges	19		31
PCBA Program | Restructuring And Other Charges
Restructuring and Other Costs
Beginning balance			101
Charges			24
Cash payments			(51)
Non-cash asset write-offs			(7)
Translation and other adjustments			(7)
Ending balance	60		60
Employee- Related Costs | PCBA Program | Restructuring And Other Charges
Restructuring and Other Costs
Beginning balance			101
Charges			5
Cash payments			(39)
Non-cash asset write-offs			0
Translation and other adjustments			(7)
Ending balance	60		60
Asset- Related Costs | PCBA Program | Restructuring And Other Charges
Restructuring and Other Costs
Beginning balance			0
Charges			7
Cash payments			0
Non-cash asset write-offs			(7)
Translation and other adjustments			0
Ending balance	0		0
Contract Terminations | PCBA Program | Restructuring And Other Charges
Restructuring and Other Costs
Beginning balance			0
Charges			11
Cash payments			(11)
Non-cash asset write-offs			0
Translation and other adjustments			0
Ending balance	0		0
Other Exit Costs | PCBA Program | Restructuring And Other Charges
Restructuring and Other Costs
Beginning balance			0
Charges			1
Cash payments			(1)
Non-cash asset write-offs			0
Translation and other adjustments			0
Ending balance	$ 0		$ 0

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Derivative Instruments Included in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Derivatives, Fair Value
Derivative asset, total	$ 69	$ 67
Derivative liability, total	118	56
Derivatives Designated as Hedging Instruments: | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	46	61
Derivatives Designated as Hedging Instruments: | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	93	20
Derivatives Designated as Hedging Instruments: | Foreign currency cash flow hedges | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	21	12
Derivatives Designated as Hedging Instruments: | Foreign currency cash flow hedges | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	22	20
Derivatives Designated as Hedging Instruments: | Net investment hedges | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	15	34
Derivatives Designated as Hedging Instruments: | Net investment hedges | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	0	0
Derivatives Designated as Hedging Instruments: | Interest rate-related derivatives | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	10	15
Derivatives Designated as Hedging Instruments: | Interest rate-related derivatives | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	71	0
Derivatives Not Designated as Hedging Instruments: | Foreign currency forward contracts | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	23	6
Derivatives Not Designated as Hedging Instruments: | Foreign currency forward contracts | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	$ 25	$ 36

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Gain (Loss) on Derivative Financial Instruments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	$ 25	$ 158	$ 102	$ (46)
Amounts reclassified to earnings during the year	3	(8)	(6)	(13)
Cash flow hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	8	33	15	(29)
Amounts reclassified to earnings during the year	3	(8)	(6)	(13)
Current debt
Gain (loss) on derivative financial instruments
Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability			1
Current debt | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Carrying Amount of the Hedged Liabilities	251		251
Long-term debt
Gain (loss) on derivative financial instruments
Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability			(71)
Long-term debt | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Carrying Amount of the Hedged Liabilities	921		921
Total debt
Gain (loss) on derivative financial instruments
Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability			(70)
Total debt | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Carrying Amount of the Hedged Liabilities	1,172		1,172
Net sales
Gain (loss) on derivative financial instruments
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	4,245	3,864	14,176	12,279
Interest expense
Gain (loss) on derivative financial instruments
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	41	43	125	131
Foreign currency forward contracts | Cash flow hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	(2)	22	5	(43)
Foreign currency forward contracts | Net investment hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	17	125	87	(17)
Amounts reclassified to earnings during the year	0	0	0	0
Foreign currency forward contracts | Net sales | Cash flow hedges
Gain (loss) on derivative financial instruments
Amounts reclassified to earnings during the year	3	(7)	(5)	(11)
Interest rate-related derivatives | Cash flow hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	10	11	10	14
Interest rate-related derivatives | Interest expense | Cash flow hedges
Gain (loss) on derivative financial instruments
Amounts reclassified to earnings during the year	0	(1)	(1)	(2)
Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Amount of gain (loss) reclassified from AOCI to earnings	69	18	85	23
Net investment hedges
Gain (loss) on derivative financial instruments
Gain recognized in earnings related to the amount excluded from effectiveness testing	3	5	8	15
Derivatives Designated as Hedging Instruments: | Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Amount of gain (loss) reclassified from AOCI to earnings	(69)	(18)	(85)	(23)
Amount of gain (loss) reclassified from AOCI to earnings	(69)	(18)	(85)	(23)
Derivatives Not Designated as Hedging Instruments: | Foreign currency forward contracts | Selling, general and administrative
Gain (loss) on derivative financial instruments
Amount of gain (loss) reclassified from AOCI to earnings	$ 17	$ (97)	$ (32)	$ (34)

XML

DERIVATIVE FINANCIAL INSTRUMENTS - Cash Flow Hedges, Fair Value Hedges, Credit Risk (Details)	9 Months Ended
	Mar. 31, 2022 USD ($) agency	Jun. 30, 2021 USD ($)
Derivatives Not Designated as Hedging Instruments:
Derivative instruments
Notional amount	$ 3,887,000,000
Foreign Currency Cash-Flow Hedges
Notional amount	$ 3,887,000,000
Derivative
Credit Risk
Minimum number of nationally recognized rating agencies | agency	2
Maximum exposure to credit risk in the event of non performance by counterparties, gross fair value of contracts in asset positions	$ 69,000,000
Cash flow hedges
Foreign Currency Cash-Flow Hedges
Amount expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months	1,000,000
Accumulated net gain (loss) on derivative instruments in AOCI, before tax	20,000,000	$ (1,000,000)
Cash flow hedges | Foreign currency forward contracts
Derivative instruments
Notional amount	1,563,000,000
Foreign Currency Cash-Flow Hedges
Notional amount	1,563,000,000
Derivatives in fair value hedging relationships | Interest rate swap contracts | 2.35% Senior Notes due August 15, 2022 ("2022 Senior Notes")
Fair Value Hedges
Notional amount	$ 250,000,000
Derivatives in fair value hedging relationships | Interest rate swap contracts | 2.35% Senior Notes due August 15, 2022 ("2022 Senior Notes") | LIBOR
Fair Value Hedges
Number of months for LIBOR calculation	3 months
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes Due April 2030
Fair Value Hedges
Notional amount	$ 700,000,000
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes Due April 2030 | LIBOR
Fair Value Hedges
Number of months for LIBOR calculation	3 months
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes One Ninety Five Percent Due 2031
Fair Value Hedges
Notional amount	$ 300,000,000
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes One Ninety Five Percent Due 2031 | LIBOR
Fair Value Hedges
Number of months for LIBOR calculation	3 months
Net investment hedges | Foreign currency forward contracts
Fair Value Hedges
Notional amount	$ 1,372,000,000

XML

FAIR VALUE MEASUREMENTS - Hierarchy For Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring basis - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Assets:
Money market funds	$ 1,019	$ 2,079
Foreign currency forward contracts	59	52
Interest rate-related derivatives	10	15
Total	1,088	2,146
Liabilities:
Foreign currency forward contracts	47	56
Interest rate-related derivatives	71
DECIEM stock options	74	141
Total	192	197
Level 1
Assets:
Money market funds	1,019	2,079
Foreign currency forward contracts	0	0
Interest rate-related derivatives	0	0
Total	1,019	2,079
Liabilities:
Foreign currency forward contracts	0	0
Interest rate-related derivatives	0
DECIEM stock options	0	0
Total	0	0
Level 2
Assets:
Money market funds	0	0
Foreign currency forward contracts	59	52
Interest rate-related derivatives	10	15
Total	69	67
Liabilities:
Foreign currency forward contracts	47	56
Interest rate-related derivatives	71
DECIEM stock options	0	0
Total	118	56
Level 3
Assets:
Money market funds	0	0
Foreign currency forward contracts	0	0
Interest rate-related derivatives	0	0
Total	0	0
Liabilities:
Foreign currency forward contracts	0	0
Interest rate-related derivatives	0
DECIEM stock options	74	141
Total	$ 74	$ 141

XML

FAIR VALUE MEASUREMENTS - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Derivatives
Derivative asset	$ 69	$ 67
Derivative liability	(118)	(56)
Carrying Amount
Nonderivatives
Cash and cash equivalents	3,836	4,958
Current and long-term debt	5,457	5,569
DECIEM stock options	74	141
Carrying Amount | Foreign currency forward contracts
Derivatives
Derivative asset	12
Derivative liability		(4)
Carrying Amount | Interest rate-related derivatives
Derivatives
Derivative asset		15
Derivative liability	(61)
Fair Value
Nonderivatives
Cash and cash equivalents	3,836	4,958
Current and long-term debt	5,607	6,262
DECIEM stock options	74	141
Fair Value | Foreign currency forward contracts
Derivatives
Derivative asset	12
Derivative liability		(4)
Fair Value | Interest rate-related derivatives
Derivatives
Derivative asset		$ 15
Derivative liability	$ (61)

XML

FAIR VALUE MEASUREMENTS - Impairment Charges (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Estimated fair values of financial instruments
Goodwill impairment	$ 0	$ 0	$ 0	$ 54
Level 3 | Fair Value, Nonrecurring
Estimated fair values of financial instruments
Goodwill impairment				67
Long-lived assets, impairment charge				33
Impairment charges			216	161
Level 3 | Fair Value, Nonrecurring | GLAMGLOW
Estimated fair values of financial instruments
Goodwill impairment				54
Level 3 | Fair Value, Nonrecurring | BECCA
Estimated fair values of financial instruments
Goodwill impairment				13
Level 3 | Fair Value, Nonrecurring | Trademarks and Customer Lists
Estimated fair values of financial instruments
Impairment charges of indefinite-lived intangible assets			216	61
Level 3 | Fair Value, Nonrecurring | Trademarks and Customer Lists | GLAMGLOW
Estimated fair values of financial instruments
Impairment charges of indefinite-lived intangible assets			11	27
Level 3 | Fair Value, Nonrecurring | Trademarks and Customer Lists | Dr. Jart+
Estimated fair values of financial instruments
Impairment charges of indefinite-lived intangible assets			205
Level 3 | Fair Value, Nonrecurring | Trademarks and Customer Lists | BECCA
Estimated fair values of financial instruments
Impairment charges of indefinite-lived intangible assets				34
Level 3 | Fair Value, Nonrecurring | Fair Value
Estimated fair values of financial instruments
Goodwill, fair value		0		0
Long-lived assets, fair value		35		35
Fair Value	486	71	486	71
Level 3 | Fair Value, Nonrecurring | Fair Value | GLAMGLOW
Estimated fair values of financial instruments
Goodwill, fair value		0		0
Level 3 | Fair Value, Nonrecurring | Fair Value | BECCA
Estimated fair values of financial instruments
Goodwill, fair value		0		0
Level 3 | Fair Value, Nonrecurring | Fair Value | Trademarks and Customer Lists
Estimated fair values of financial instruments
Trademark, fair value	486	36	486	36
Level 3 | Fair Value, Nonrecurring | Fair Value | Trademarks and Customer Lists | GLAMGLOW
Estimated fair values of financial instruments
Trademark, fair value	0	36	0	36
Level 3 | Fair Value, Nonrecurring | Fair Value | Trademarks and Customer Lists | Dr. Jart+
Estimated fair values of financial instruments
Trademark, fair value	$ 486		$ 486
Level 3 | Fair Value, Nonrecurring | Fair Value | Trademarks and Customer Lists | BECCA
Estimated fair values of financial instruments
Trademark, fair value		$ 0		$ 0

XML

FAIR VALUE MEASUREMENTS - Foreign Currency Forward Contracts Maturity and Additional Purchase Price Payable - Narrative (Details) - Foreign currency forward contracts	9 Months Ended
	Mar. 31, 2022
Maximum | LIBOR
Foreign currency forward contracts
Contract maturities	12 months
Minimum | Swap yield curve
Foreign currency forward contracts
Contract maturities	12 months

XML

FAIR VALUE MEASUREMENTS - Changes in DECEIM Stock Option Liability (Details) - Level 3 - Recurring basis - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2022
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Changes in fair value, net of foreign currency remeasurements	$ 60	$ 58
DECIEM Stock Option
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
DECIEM stock option liability as of June 30, 2021		141
Changes in fair value, net of foreign currency remeasurements		(58)
Translation adjustments and other, net		(9)
DECIEM stock option liability as of March 31, 2022	$ 74	$ 74

XML

REVENUE RECOGNITION - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Revenue from Contract with Customer [Abstract]
Allowance for doubtful accounts and customer deductions	$ 36	$ 40
Allowance for non-credit losses	$ 19

XML

REVENUE RECOGNITION - Changes in Allowance for Credit Losses (Details) $ in Millions	9 Months Ended
	Mar. 31, 2022 USD ($)
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at June 30, 2021	$ 20
Adjustment for expected credit losses	(2)
Write-offs, net & other	(1)
Balance at March 31, 2022	$ 17

XML

REVENUE RECOGNITION - Changes in Deferred Revenue (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Change in Contract with Customer, Liability [Abstract]
Balance at the beginning of the period	$ 421	$ 420	$ 371	$ 279
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(40)	(25)	(288)	(198)
Revenue deferred (released) during the period	(13)	(30)	285	278
Other	(4)	(4)	(4)	2
Balance at the end of the period	$ 364	$ 361	$ 364	$ 361

XML

REVENUE RECOGNITION - Transaction Price Allocated to the Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01 $ in Millions	Mar. 31, 2022 USD ($)
REVENUE RECOGNITION
Expected timing of revenue recognition	12 months
Estimated recognition of deferred revenue	$ 313

XML

PENSION AND POST-RETIREMENT BENEFIT PLANS - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Pension Plans | U.S.
Components of net periodic benefit cost:
Service cost	$ 12	$ 12	$ 35	$ 34
Interest cost	8	8	23	23
Expected return on plan assets	(14)	(14)	(41)	(40)
Amortization of:
Actuarial loss	4	5	11	15
Prior service cost	0	0	0	0
Settlements	0	0	0	0
Special termination benefits	0	0	0	0
Net periodic benefit cost	10	11	28	32
Pension Plans | International
Components of net periodic benefit cost:
Service cost	8	9	24	27
Interest cost	3	2	8	7
Expected return on plan assets	(4)	(4)	(11)	(10)
Amortization of:
Actuarial loss	0	1	1	3
Prior service cost	0	0	(1)	0
Settlements	0	1	0	1
Special termination benefits	1	1	4	10
Net periodic benefit cost	8	10	25	38
Employer contributions			17
Other than Pension Plans Post-retirement
Components of net periodic benefit cost:
Service cost	1	2	2	2
Interest cost	1	1	4	4
Expected return on plan assets	0	(1)	(1)	(1)
Amortization of:
Actuarial loss	0	0	1	0
Prior service cost	0	0	0	0
Settlements	0	0	0	0
Special termination benefits	0	0	0	0
Net periodic benefit cost	$ 2	$ 2	$ 6	$ 5

XML

PENSION AND POST-RETIREMENT BENEFIT PLANS - Amounts Recognized in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions	Mar. 31, 2022	Jun. 30, 2021
Amounts recognized in the consolidated balance sheets consist of:
Other assets	$ 142	$ 162
Other accrued liabilities	(28)	(28)
Other noncurrent liabilities	(426)	(432)
Funded status	(312)	(298)
Accumulated other comprehensive loss	229	242
Net amount recognized	$ (83)	$ (56)

XML

STOCK PROGRAMS - Compensation Expense and Stock Options (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award
Non-cash stock-based compensation	$ 91	$ 86	$ 283	$ 255
Common Class A
Share-based Compensation Arrangement by Share-based Payment Award
Grant at fair value (in shares)			1.1
Exercise price (in dollars per share)			$ 344.09
Weighted-average grant date fair value (in dollars per share)			$ 85.56
Additional General Disclosures
Intrinsic value of stock options exercised (in dollars)			$ 248

XML

STOCK PROGRAMS - Restricted Stock Units (Details) - Restricted Stock Units - Employee - Common Class A shares in Millions	9 Months Ended
	Mar. 31, 2022 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award
Granted (in shares)	0.7
Weighted-average grant date fair value (in dollars per share) | $ / shares	$ 340.18
RSU grants scheduled to vest in fiscal 2023
Share-based Compensation Arrangement by Share-based Payment Award
RSU grants scheduled to vest (in shares)	0.2
RSU grants scheduled to vest in fiscal 2024
Share-based Compensation Arrangement by Share-based Payment Award
RSU grants scheduled to vest (in shares)	0.2
RSU grants scheduled to vest in fiscal 2025
Share-based Compensation Arrangement by Share-based Payment Award
RSU grants scheduled to vest (in shares)	0.3

XML

STOCK PROGRAMS - Performance Share Units (Details) - Performance Share Units - Employee - $ / shares shares in Millions	1 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Mar. 31, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award
Vested (in shares)			0.2
Common Class A
Share-based Compensation Arrangement by Share-based Payment Award
Granted (in shares)		0.1
Weighted-average grant date fair value (in dollars per share)		$ 344.06
Common Stock issued (in shares)	0.2

XML

STOCK PROGRAMS - DECIEM Stock Options (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2022	Jun. 30, 2021
Recurring basis
Share-based Compensation Arrangement by Share-based Payment Award
Stock option liability	$ 74	$ 74	$ 141
Level 3 | Recurring basis
Share-based Compensation Arrangement by Share-based Payment Award
Changes in fair value, net of foreign currency remeasurements	60	58
Stock option liability	74	$ 74	141
DECIEM 2021 Stock Option Plan
Share-based Compensation Arrangement by Share-based Payment Award
Exercised in period (in shares)		0
DECIEM 2021 Stock Option Plan | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award
Stock option liability	74	$ 74	$ 141
DECIEM 2021 Stock Option Plan | Stock Options | DECIEM
Share-based Compensation Arrangement by Share-based Payment Award
Fair value of stock options	295	295
Stock option liability	$ 104	$ 104

XML

STOCK PROGRAMS - Schedule of Key Assumptions Used For Award (Details) - Stock Options - DECIEM - DECIEM 2021 Stock Option Plan	Mar. 31, 2022	Jun. 30, 2021	May 18, 2021
Share-based Compensation Arrangement by Share-based Payment Award
Risk-free rate (as a percent)	1.80%	0.50%	0.50%
Term to mid of last twelve-month period	1 year 8 months 1 day	2 years 5 months 1 day	2 years 6 months 14 days
Operating leverage adjustment	0.45	0.45	0.45
Net sales discount rate (as a percent)	5.00%	3.40%	3.30%
EBITDA discount rate (as a percent)	8.90%	6.90%	6.80%
EBITDA volatility (as a percent)	34.00%	37.70%	38.30%
Net sales volatility (as a percent)	15.30%	17.00%	17.20%

XML

NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Reconciliation Between Numerator and Denominator of Basic and Diluted EPS Computations (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$ 558	$ 456	$ 2,338	$ 1,852
Denominator:
Weighted-average common shares outstanding - Basic (in shares)	359.2	363.6	360.7	362.9
Weighted-average common shares outstanding - Diluted (in shares)	363.6	369.0	365.8	368.1
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic (in dollars per share)	$ 1.55	$ 1.25	$ 6.48	$ 5.10
Diluted (in dollars per share)	$ 1.53	$ 1.24	$ 6.39	$ 5.03
Stock Options
Denominator:
Incremental common shares attributable to share-based payment arrangements (in shares)	3.5	4.1	3.9	3.9
Performance Share Units
Denominator:
Incremental common shares attributable to share-based payment arrangements (in shares)	0.2	0.2	0.2	0.2
Restricted Stock Units
Denominator:
Incremental common shares attributable to share-based payment arrangements (in shares)	0.7	1.1	1.0	1.1

XML

NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Antidilutive Securities Excluded from Computation of Earnings, Per Share (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Stock Options
Antidilutive Securities Excluded from Computation of Earnings, Per Share
Antidilutive shares excluded from the calculation of diluted earnings per share	1.0	0.0	0.8	0.9
Restricted Stock Units and Performance Shares
Antidilutive Securities Excluded from Computation of Earnings, Per Share
Antidilutive shares excluded from the calculation of diluted earnings per share	0.0	0.0	0.1	0.1
Contingently Issuable Shares
Antidilutive Securities Excluded from Computation of Earnings, Per Share
Antidilutive shares excluded from the calculation of diluted earnings per share			0.7	0.9

XML

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Equity Roll forward (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Increase (Decrease) in Stockholders' Equity
Beginning of the period			$ 6,091
Net earnings attributable to The Estée Lauder Companies Inc.	$ 558	$ 456	2,338	$ 1,852
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc.	33	(105)	(162)	179
Net earnings attributable to noncontrolling interests	(3)	(2)	(8)	(8)
End of the period	6,186	5,558	6,186	5,558
Increase (Decrease) in Redeemable Noncontrolling Interest
Beginning of the period			857
Net earnings attributable to redeemable noncontrolling interest	12	0	12	0
Translation adjustments	(14)	$ 0	3	$ 0
End of the period	$ 865		$ 865
Cash dividends declared per common share (in dollars per share)	$ 0.60	$ 0.53	$ 1.73	$ 1.54
Total Stockholders' equity - The Estee Lauder Companies Inc.
Increase (Decrease) in Stockholders' Equity
End of the period	$ 6,150	$ 5,528	$ 6,150	$ 5,528
Common Stock
Increase (Decrease) in Stockholders' Equity
Beginning of the period	6	6	6	6
Stock-based compensation	0	0	0	0
End of the period	6	6	6	6
Paid-in Capital
Increase (Decrease) in Stockholders' Equity
Beginning of the period	5,605	5,068	5,335	4,790
Stock-based compensation	139	162	408	439
Common stock dividends	2	1	3	2
End of the period	5,746	5,231	5,746	5,231
Retained Earnings
Increase (Decrease) in Stockholders' Equity
Beginning of the period	13,735	11,159	12,244	10,134
Common stock dividends	(217)	(195)	(627)	(563)
Net earnings attributable to The Estée Lauder Companies Inc.	558	456	2,338	1,852
End of the period	14,076	11,420	14,076	11,420
Retained Earnings | Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity
Beginning of the period	0	0	121	(3)
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity
Beginning of the period	(646)	(383)	(470)	(665)
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc.	20	(104)	(156)	178
End of the period	(626)	(487)	(626)	(487)
Treasury Stock
Increase (Decrease) in Stockholders' Equity
Beginning of the period	(12,482)	(10,429)	(11,058)	(10,330)
Stock-based compensation	(2)	(1)	(144)	(100)
Acquisition of treasury stock	(568)	(212)	(1,850)	(212)
End of the period	(13,052)	(10,642)	(13,052)	(10,642)
Non-controlling Interests
Increase (Decrease) in Stockholders' Equity
Beginning of the period	34	35	34	27
Net earnings attributable to noncontrolling interests	3	2	8	8
Distribution to noncontrolling interest holders	0	(6)	0	(6)
Translation adjustments and other, net	(1)	(1)	(6)	1
End of the period	36	30	36	30
Redeemable Noncontrolling Interest
Increase (Decrease) in Redeemable Noncontrolling Interest
Beginning of the period	840	0	857	0
Net earnings attributable to redeemable noncontrolling interest	12	0	12	0
Translation adjustments	14	0	(3)	0
Adjustment of redeemable noncontrolling interest to redemption value	(1)	0	(1)	0
End of the period	$ 865	$ 0	$ 865	$ 0

XML

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Class of Stock and Dividend Information (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions								3 Months Ended		9 Months Ended
	May 02, 2022	Mar. 15, 2022	Feb. 02, 2022	Dec. 15, 2021	Nov. 01, 2021	Sep. 15, 2021	Aug. 18, 2021	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Class of Stock
Cash dividends declared per common share (in dollars per share)								$ 0.60	$ 0.53	$ 1.73	$ 1.54
Conversion of Class B to Class A (in shares)										2.7
Common Class A
Class of Stock
Cash dividends declared per common share (in dollars per share)			$ 0.60		$ 0.60		$ 0.53
Cash dividends paid per common share (in dollars per share)		$ 0.60		$ 0.60		$ 0.53
Stock repurchased during period (in shares)										6.2
Stock repurchased during period										$ 1,998
Common Class A | Subsequent Event
Class of Stock
Cash dividends declared per common share (in dollars per share)	$ 0.60
Common Class B
Class of Stock
Cash dividends declared per common share (in dollars per share)		$ 0.60	$ 0.60		$ 0.60		$ 0.53
Cash dividends paid per common share (in dollars per share)				$ 0.60		$ 0.53
Common Class B | Subsequent Event
Class of Stock
Cash dividends declared per common share (in dollars per share)	$ 0.60

XML

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Changes in Accumulated Other Comprehensive Income (Loss) (Details) $ in Millions	9 Months Ended
	Mar. 31, 2022 USD ($)
Changes in AOCI, net of tax, by component
Balance, beginning of the period	$ 6,057
Balance, end of the period	6,150
Accumulated Other Comprehensive Loss
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(470)
OCI before reclassifications	(169)
Amounts reclassified to Net earnings	13
Net current-period OCI	(156)
Balance, end of the period	(626)
Net Cash Flow Hedge Gain (Loss)
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(2)
OCI before reclassifications	12
Amounts reclassified to Net earnings	4
Net current-period OCI	16
Balance, end of the period	14
Amounts Included in Net Periodic Benefit Cost
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(179)
OCI before reclassifications	1
Amounts reclassified to Net earnings	9
Net current-period OCI	10
Balance, end of the period	(169)
Translation Adjustments
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(289)
OCI before reclassifications	(182)
Amounts reclassified to Net earnings	0
Net current-period OCI	(182)
Balance, end of the period	$ (471)

XML

EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Reclassification Adjustments From Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Reclassification adjustments from accumulated other comprehensive income (loss)
Net sales	$ 4,245	$ 3,864	$ 14,176	$ 12,279
Interest expense	41	43	125	131
Other components of net periodic benefit cost	1	(2)	2	(12)
Earnings before income taxes	703	580	2,988	2,281
Provision for income taxes	(130)	(122)	(630)	(421)
Net earnings	573	458	2,358	1,860
Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Net earnings	0	(10)	(13)	(24)
Gain (Loss) on Cash Flow Hedges | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Earnings before income taxes	3	(8)	(6)	(13)
Provision for income taxes	0	2	2	3
Net earnings	3	(6)	(4)	(10)
Gain (Loss) on Cash Flow Hedges | Foreign currency forward contracts | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Net sales	3	(7)	(5)	(11)
Gain (Loss) on Cash Flow Hedges | Interest rate-related derivatives | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Interest expense	0	(1)	(1)	(2)
Amortization of prior service cost | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Other components of net periodic benefit cost	0	0	1	0
Amortization of actuarial loss | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Other components of net periodic benefit cost	(4)	(6)	(13)	(18)
Amounts Included in Net Periodic Benefit Cost | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Settlements	0	(1)	0	(1)
Earnings before income taxes	(4)	(7)	(12)	(19)
Provision for income taxes	1	3	3	5
Net earnings	$ (3)	$ (4)	$ (9)	$ (14)

XML

STATEMENT OF CASH FLOWS (Details) - USD ($) $ in Millions	9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash:
Cash paid during the period for interest	$ 110	$ 108
Cash paid during the period for income taxes	626	435
Non-cash investing and financing activities:
Property, plant and equipment accrued but unpaid	110	68
Financing lease modifications	(13)	0
Right-of-use assets obtained in exchange for new/modified operating lease liabilities	$ 179	$ 167

XML

SEGMENT DATA AND RELATED INFORMATION - Narrative (Details)	9 Months Ended
	Mar. 31, 2022 segment
Segment Reporting [Abstract]
Number of operating segments	1

XML

SEGMENT DATA AND RELATED INFORMATION - Schedule of Segment Data and Related Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Mar. 31, 2022	Mar. 31, 2021
Net sales:
Net sales before returns associated with restructuring and other activities	$ 4,246	$ 3,874	$ 14,179	$ 12,289
Charges associated with restructuring and other activities	(23)	(145)	(44)	(191)
Net sales	4,245	3,864	14,176	12,279
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	761	761	3,135	2,575
Operating income	738	616	3,091	2,384
Reconciliation:
Interest expense	(41)	(43)	(125)	(131)
Interest income and investment income, net	5	9	19	40
Other components of net periodic benefit cost	1	(2)	2	(12)
Other income	0	0	1	0
Earnings before income taxes	703	580	2,988	2,281
Sales Returns (included in Net Sales)
Net sales:
Charges associated with restructuring and other activities	(1)	(10)	(3)	(10)
The Americas
Net sales:
Net sales before returns associated with restructuring and other activities	1,053	916	3,547	2,837
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	408	155	1,044	256
Europe, the Middle East & Africa
Net sales:
Net sales before returns associated with restructuring and other activities	1,990	1,706	6,201	5,276
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	281	361	1,366	1,429
Asia/Pacific
Net sales:
Net sales before returns associated with restructuring and other activities	1,203	1,252	4,431	4,176
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	72	245	725	890
Skin Care
Net sales:
Net sales before returns associated with restructuring and other activities	2,395	2,259	8,003	7,113
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	667	804	2,466	2,453
Makeup
Net sales:
Net sales before returns associated with restructuring and other activities	1,114	1,018	3,674	3,243
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	7	(72)	228	(115)
Fragrance
Net sales:
Net sales before returns associated with restructuring and other activities	579	454	1,987	1,478
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	105	47	446	248
Hair Care
Net sales:
Net sales before returns associated with restructuring and other activities	147	128	475	418
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	(18)	(17)	(8)	(10)
Other
Net sales:
Net sales before returns associated with restructuring and other activities	11	15	40	37
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	$ 0	$ (1)	$ 3	$ (1)